The Socialist Party (PS) won in 161 of the 308 town halls being contested, garnering 38 percent of the vote across the country, final results from the interior ministry showed -- beating its victorious run in the 2013 municipal contests.
"The Socialist Party had its biggest local election victory in history," Socialist Prime Minister Antonio Costa said Sunday.
"The result strengthens the PS and the change we began two years ago," he said. Costa came to power in 2015 after his party teamed up with the Communists and the left bloc.
Opposition leader and former conservative prime minister Pedro Passos Coelho acknowledged that his Social Democratic Party (PSD) had "one of the worst results in its history".
Alone or leading a coalition, the centre-right party won 6 town halls and nearly 30 percent of the vote, down from 2013 when it lost votes for its austerity policies.
Faced with a defeat described as "humiliating" by local media, Passos Coelho opened the door to resigning.
"I will consider the conditions under which I may or may not seek a new mandate to head the PSD," he said.
'Positive dynamic'
The Communists also had a bad day, losing nine municipalities to the Socialists, including their stronghold of Almada in the southern suburbs of capital Lisbon.
Lisbon's incumbent Socialist mayor Fernando Medina was re-elected with 42 percent of the vote.
Former PSD leader Luis Marques Mendes said the party's losses were "a monumental debacle, which can be explained by the poor choice of candidates and a bad campaign".
Costa is "one of the great winners" of the elections, Mendes added, because "he has succeeded in creating a positive dynamic with his government's good results, particularly economic results".
Portugal's economic growth is at a 15-year high and its unemployment rate is at its lowest since 2009.
Costa has pledged to "turn the page" on austerity, scrapping some of the main austerity measures put in place between 2011 and 2014 that were part of a bailout deal with the EU and IMF.
But the stability of his government still depends on bitterly negotiated concessions with the Communists and the left bloc, which are highly critical of the Socialists' pro-Europe stance.
After their setback Sunday, Communist leaders may move to harden their stance in budget negotiations currently underway, relying more on their union heft.
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