Portugal's ruling coalition has lost its outright majority in parliament following the general election. The poll was seen as a referendum on unpopular austerity policies.
Portuguese Prime Minister Pedro Passos Coelho said he was ready to form a new government, despite his center-right coalition losing its absolute parliamentary majority on Sunday.
The "Portugal Forward" coalition received 37 percent of the vote, compared with 32 percent for the main opposition center-left Socialists.
The alliance now faces difficult talks to broaden the coalition. Before the election, the opposition had vowed not to support a conservative minority government or approve another austerity budget for 2016.
The leader of Portugal's Socialists, former Lisbon mayor Antonio Costa, conceded defeat late Sunday following his promise to ease painful reforms imposed on western Europe's poorest country.
Coelho: Austerity is paying off
Austerity formed the center of the election campaign. Passos Coelho campaigned on his record of having returned the country to fragile growth after one of the worst crises in its history.
Portugal received a 78-billion-euro ($87-billion) bailout in 2011 at the height of the EU financial crisis. Its austerity plan cut pensions and public services while increasing taxes, policies which propelled Portugal into a three-year recession.
The Socialists had hoped they could benefit from a backlash against the government, but the coalition's victory marks a rare case of a bailed-out country re-electing its government.
A handful of grassroots anti-austerity parties barely registered in the ballot. Portugal's economy grew 1.5 percent this year, allowing the government to argue that austerity is paying off - and voters were seemingly unwilling to knock a long-awaited recovery off track.
"Portugal Forward" had needed to top 40 percent of the vote to win its majority in parliament. It won 50.3 percent of the vote back in 2011.
jr/cmk (AP, dpa, Reuters, AFP)