Portuguese voters have taken out their frustrations on the centre-right coalition and their austerity policies in municipal elections.
The opposition Socialists retain power in the capital Lisbon, with an increased share of the vote, and Prime Minister Passos Coelho's centre-right Social Democratic Party (SDP) has lost control of Portugal's second city Porto.
The SDP also lost out in other major urban centres.
The elections were seen as the first test of the austerity policies championed by the two-year-old centre-right coalition government.
In exchange for a 78 billion euros ($A113.17 billion) rescue package in May 2011, Portugal's government has imposed tax hikes and wage and pension cuts in a bid to balance the budget, aggravating a downturn that has sent unemployment to a record 17.7 per cent at the beginning of this year.
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Despite growing discontent, the government has largely pushed forward with measures to repair public finances as it seeks further disbursements of bailout funding.
However, voters appeared to take their revenge on Sunday.
In Lisbon, the Socialist mayor Antonio Costa won a third term by a wide margin, securing more votes than in the last municipal election in 2009.
He garnered between 51 and 55 per cent of the vote according to exit polls conducted by the Catholic University for the public television channel RTP. In 2009, he scored 44 per cent.
Costa's government coalition-backed rival this time, Fernando Seara, received only 21-24 per cent of votes, according to the exit poll.
The vote came as auditors from the "troika" of the International Monetary Fund, the European Commission and the European Central Bank are in Lisbon to review Portugal's progress and decide whether to release a 5.5 billion euro loan instalment.
