The political shakeup following Sunday's elections was driven by voter anger over a sky-high unemployment rate of 24 percent, government spending cuts and corruption scandals.
The crisis has rocked both Prime Minister Mariano Rajoy's Popular Party (PP) and the main opposition Socialists, which have alternated in government for nearly four decades.
In a test of the national mood ahead of general elections expected in November, the PP managed the most votes but still lost its absolute majorities in most regions and even fared poorly in historical strongholds.
"We have lost a large part of the support the Spanish people gave us in 2011," when the country held its last election, Rajoy told a news conference on Monday.
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"We have to be closer to the Spanish people and communicate better with them."
But he insisted he could still win the general election and reiterated that the economic recovery was his top priority.
Support instead switched to new centre-right party Ciudadanos and anti-austerity party Podemos, which was born out of the "Indignado" ("Outraged") protests against corruption and high unemployment that swamped the streets during the recent economic crisis.
The Madrid candidate Manuel Carmena told reporters today she expected to become mayor, implying she would make an alliance with the Socialists to form a majority to beat the PP.
She said she had already got to work on the reforms she planned as mayor, starting with moves to stop evictions of ruined homeowners.
"We want to get to work straightaway," she said.