Next month the city of Birmingham, Alabama, will host its annual pet parade and May Crawfish Boil. But this year’s festivities risk being overshadowed by more dramatic events.

Jefferson County, in which Birmingham is located, is one of the most indebted municipal governments in the US, owing an estimated $7,000 (£3,550, €4,500) for every adult and child. In recent years it took advantage of easy lending conditions in the municipal bond market, mainly to fix its ailing sewerage system. But since the credit crunch started last summer, funding costs have soared and investors have been less willing to lend. The county is now struggling to meet its interest payments.