(FORTUNE Magazine) – The free-market fever sweeping Western Europe has finally spread to Portugal, a stronghold of socialism for a decade. In July voters handed the moderate Social Democrats a thumping parliamentary victory, the first clear majority any party has won since free elections began in 1974. Prime Minister Anibal Cavaco Silva, 48, who headed a coalition government for 17 months until last April, is a former track star and economics professor who ardently admires Margaret Thatcher. He pledges to loosen Portugal's inflexible labor laws and sell off big chunks of nationalized industries, such as steel, shipping, and chemicals. Portugal is turning right even as its economy, among the poorest in Europe, shows strong improvement. Real GNP should rise about 4% this year, vs. an estimated 2.5% for the Continent as a whole. Inflation has slowed from 30% in 1985 to around 9%. Thanks to rock-bottom wage rates -- and to joining the Common Market last year -- Portugal is enjoying a festa of foreign investment, which nearly tripled to $180 million in the first half of 1987. The revitalized Lisbon bourse, where stock quotes vary widely among only six active brokers, has become Europe's hottest. Share prices have jumped more than 140% since January in a phenomenon called the ''corrida a bolsa,'' or rush to the bourse. Individual investors line up outside brokerage houses days in advance of new issues, sometimes camping out in sleeping bags. % To carry out his plans, Cavaco Silva must amend Portugal's restrictive constitution, which enshrines socialism as a national aim. That will take a two-thirds majority in the national Assembly and hence the support of the Socialists. Bruised by Cavaco Silva's triumph, they are likely to knuckle under.