Some 200 thousand people filled the streets of the Portuguese capital, Lisbon to protest at plans to cut 1,500 hundred parishes.
They came dressed in regional costume and playing regional music, providing a colourful display. They fear the reform - demanded by the EU, the IMF and the World Bank as part of the bailout package - will be a blow to their local identity.
"This is a defeat for the government because the protesters support their local regions but also democracy and responsibility," said Francisco Louca of the Left Bloc.
"They want those who have been elected to take care of the country's problems and assume their responsibilities. They were elected, they must answer to the people."
Elsewhere in Lisbon, several hundred students joined a march protesting over job insecurity and unemployment.
Their rally coincided with other anti-capitalism demonstrations around the world.