LISBON—Prime Minister Pedro Passos Coelho, who oversaw years of unpopular austerity measures that averted Portugal's bankruptcy, finished far ahead of his Socialist rival in elections on Sunday, but his center-right coalition lost its majority in Parliament.

The unexpectedly strong showing boosted the chances, but didn't assure, Mr. Passos Coelho's re-election to a second four-year term.

His governing coalition—which joins his Social Democratic Party with the smaller Democratic and Social Center Party—won 104 of the 230 seats in Parliament, according to near-complete official returns.

Former Lisbon Mayor Antonio Costa's Socialist party, which promised to ease some belt-tightening measures but stick to European Union standards of fiscal restraint, won 85 seats.

Two radical antiausterity parties—the Left Bloc and a coalition of Communists and Greens—won a total of 36 seats.

Mr. Passos Coelho said late Sunday he would seek an accord with the Socialists to allow him to form a minority government and pass legislation needed to sustain Portugal's recovery from a punishing recession.

"Our obligations as a government require us to set aside our party flags and unite everyone who wants to build a better country," he told supporters.

Mr. Costa gave no assurances. "It is clear that an expressive majority voted for a political change," he said. But he signaled he wouldn't challenge Mr. Passos Coelho's re-election unless other leftist parties in Parliament agreed to form a majority behind the Socialists' own pro-EU program.

Austerity fatigue had made Mr. Passos Coelho, a 51-year-old career politician with a degree in economics, the underdog in the race.

Taking office in 2011, he had raised taxes and cut spending on public employees' salaries, education and health care to meet budget targets set by international lenders under the €78 billion ($87 billion) rescue.

The measures drove down the budget deficit to about 3% of gross domestic product estimated for this year, from close to 10%, but brought down his popularity with it.

Until late August, polls gave the Socialists a lead. But as undecided voters made up their minds in the campaign's closing weeks, surveys showed sentiment swinging the other way.

Mr. Passos Coelho delivered a consistent message of improvement since Portugal's exit from the bailout program in May 2014. The jobless rate has fallen to close to 12% from a peak of 17%, and gross domestic product is expected to grow 1.6% this year.

The prime minister reminded voters that a Socialist government had been forced to seek the bailout after leading Portugal to the brink of insolvency four years ago.

That message resonated with Julio Gata, who lined up in the rain to vote in Lisbon.

"Of course no one wants austerity, but above all, no one wants instability," said Mr. Gata, 71, a retired grain farmer. He was voting for the prime minister's slate of candidates, he said, "because I trust them more to keep stability."

Mr. Costa tried, with mixed messages, to woo both voters who want continuity and those who reject the idea of belt tightening to pay off the €220 billion public debt. At one point, he called for an end to political confrontation; days later, he said he would shoot down Mr. Passos Coelho's budget in Parliament if the prime minister were re-elected.

Both men promised to stimulate faster growth by raising public salaries and eliminating a special income tax imposed under the bailout plan. But Mr. Passos Coelho said he would move at a slower pace than Mr. Costa.

Antiausterity parties with more radical positions gained at the Socialists' expense. But none achieved the popularity of Syriza in Greece or the Podemos party in Spain, which have capitalized on the pain of bailout-mandated austerity in those countries.

Write to Patricia Kowsmann at patricia.kowsmann@wsj.com

 

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

October 04, 2015 20:55 ET (00:55 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.