Its preliminary report on local finances in the first half of the year stated that “25 of the 308 municipalities were over the total debt limit at the end of the first half of the year”.

Out of these 25, four were in a state of “financial collapse”: Cartaxo (Santarem district), Fornos de Algodres (Guarda), Nordeste (Sao Miguel, Azores) and Vila Real de Santo António (Faro).

Financial collapse is defined as when the town council owes three times more than its average income in the previous three years (in this case 2015 to 2017).

The Local Finances Law states that a municipality’s total debt (including amounts owed by municipal companies) should not be higher than 1.5 times the net current income from the previous three years and that municipalities with excessive debt must resort to financial rescue mechanisms.

At the end of June, there were 25 municipalities that did not comply with the debt limits.