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The three victims were all local residents who died in their homes, authorities reported, and one person remains missing. A fourth person was also reported to have died due to a wildfire in mainland Portugal.
Regional governor Miguel Albuquerque said at a press conference that 80 people were in hospital suffering from burns and smoke inhalation.
Fuelled by a summer heatwave and strong winds, the fires have destroyed approximately 40 homes and a five-star hotel in the hills above Funchal.
Albuquerque said that the fire in Funchal was mostly under control, but that several were still raging across the island.
“The situation is complex but not catastrophic,” he told a press conference.
Fires began in the hills around Funchal on Monday night but 24 hours later worsened dramatically, fanned by strong winds.
Around 600 people were evacuated to a Portuguese military base, and 300 more were evacuated to the Barreiros stadium, Funchal mayor Paulo Cafofo said.
Two hospitals on the island were also evacuated.
Overnight, Portugal dispatched a team of 110 specialists including firefighters, police and doctors to help bolster the island’s response to the blaze while the Azores, another Portuguese territory in the Atlantic ocean, deployed 30 men to assist.
Dubbed “the Pearl of the Atlantic,” Madeira is an autonomous region of Portugal with a population of about a quarter of a million and a booming tourism industry.
Portugal battles 100 fires
Mainland Portugal, meanwhile, has also been struck by a spate of forest fires since Friday with the north of the country, where temperatures have surged to 35 degrees Celsius (95 degrees Fahrenheit), particularly hard hit.
More than 3,000 people have been battling to contain roughly 100 fires across Portugal with 12 major blazes leading to the evacuation of local residents overnight.
The Portuguese interior ministry said it had requested help from the European Union in battling the inprecedented wildfires. Neighbouring Spain sent two planes and Italy one aircraft to help with the fire-fighting efforts.
“This abnormal situation surpasses the normal response capacity of our forces,” Prime Minister Antonio Costa said, warning that the next few days could be critical due to soaring temperatures.