(Bloomberg) -- The rapid growth of right-wing political forces across Europe hit Portugal on Sunday as the Chega party surged in support and quadrupled its seats in parliament.

In an early election, the center-right AD alliance took the most seats and is expected to form a government. It beat Socialists, whose vote share collapsed. 

But the far-right Chega grabbed much of the spotlight with a strong third-place result. It won 48 seats in parliament, up from 12 just two years ago. 

Despite winning the most seats, the AD is well short of a parliamentary majority. That means Portugal is likely heading for a minority government that may be forced to compromise on key policies to get support from other parties. 

That’s going to make it harder for an administration to push through the type of transformative measures AD leader Luis Montenegro says are needed to strengthen the economy and boost wages and living standards. 

One of the main selling points of the AD, which groups the Social Democratic Party (PSD) with the smaller CDS, is its pledge to cut taxes. It plans to reduce income taxes, and decrease the corporate tax rate as well as taxes on home purchases for young people. Montenegro also wants to increase the minimum wage and has pledged to tackle a housing crisis by increasing supply and reducing bureaucracy. 

Some measures would need to be approved as part of the budget, in what will potentially be a major hurdle for the new government.

“The big moment for the future government will be the vote in October to approve next year’s budget, which will require Montenegro to make compromises with Chega or with other smaller parties in the center or the left,” said Ricardo Ferreira Reis, director of the Center for Applied Research and Public Polling at the Portuguese Catholic University.

While getting policies through parliament is one challenge, the other is quite simply about survival. If history is any guide, that’s a big task. Since Portugal became a democracy 50 years ago, only two minority governments have lasted a full term.

Portuguese bonds rose in line with peers on Monday, lowering the 10-year yield 2 basis points to 2.9%. That left the spread over comparable benchmark German bunds unchanged at 64 basis points. Portugal’s PSI benchmark stock index slipped 0.1% as of 8:21 a.m. in Lisbon.

Fifty-one-year-old Montenegro, a lawyer from the northern city of Espinho, has led the PSD since July 2022. While he has never served in government, he was the party’s parliamentary leader during Portugal’s debt crisis, when the PSD was in power implementing a bailout program.

In the early hours of Monday morning, Socialist leader Pedro Nuno Santos conceded defeat in the election. Santos said the AD shouldn’t count on his party for support in parliament.

That leaves Chega as Montenegro’s best option; its numbers would give the PSD an outright majority.

But the populist party is controversial, and Montenegro has ruled a deal with a party that he’s called racist and xenophobic. He reaffirmed the commitment after the election, though said he was open to dialog will other parties in parliament.

Even if Chega is kept isolated, with Sunday’s performance it cemented its position as the third-biggest party in parliament and a powerful political presence in Portugal.

Chega, which translates as “Enough,” is led by 41-year-old Andre Ventura. He said late Sunday that Chega’s election success means it should be part of any AD-led government.

“This is a victory that needs to be heard in many places tonight,” Ventura said as he waved and jumped in front of his supporters who chanted ‘victory, victory, victory.’

“The will of the Portuguese was clear,” he said.

Chega’s surge, part of a trend seen in countries including the Netherlands, France and Germany, comes just three months before European Union elections, where populist groups are expected to make further gains. Ventura has built relations with other right-wing parties, including Vox in neighboring Spain, which congratulated him in a post on X.

Chega secured 18% of the vote in Portugal on Sunday, up from 7% just two years ago.

It’s appealed to a growing number of disgruntled voters by blaming successive left-wing and center-right governments for what he says is systemic corruption in Portugal. In one video on Chega’s website, Ventura he said he would “clean up Portugal from the Socialists and Social Democrats.” 

Those two parties have dominated Portuguese politics since the Carnation Revolution 50 years ago, when more than four decades of dictatorship ended.

(Updates with comment on challenges for a minority government.)

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