failed to create fsnotify watcher: too many open files

This is quite possibly caused by one of the limits set too low. It is common when using promtail (with Loki for example) to tail log files.

One of the ways to get over this is to increase the value (in this example max_user_instances) either for the session or by making the change permanent by adding to a file (/etc/sysctl.conf).

For testing and doing it for the session, login to the affected server and do the following

ubuntu@server:~$ cat /proc/sys/fs/inotify/max_user_instances 
ubuntu@server:~$ sudo sysctl fs.inotify.max_user_instances=8192
fs.inotify.max_user_instances = 8192
ubuntu@server:~$ cat /proc/sys/fs/inotify/max_user_instances