A new study by the Council of European Municipalities and Regions (CEMR) finds that authorities fear budget cuts will force them to curtail services next year.
Asked about the prospects for 2010, only Cyprus, Norway, Portugal and Sweden - amounting to 6% of the population covered by the survey - express optimism, whereas 44% are pessimistic for 2010 and 50% do not foresee any change.
This is at odds with the view from Brussels, where major institutions are relatively bullish about the prospects for growth next year.
The new study is a follow-up to a survey released in April 2009 and reveals that three quarters of public authorities believe the situation has worsened since the first quarter of the year.
Respondents representing 90% of Europe's population say access to borrowing for investment has not improved since April this year, with the CEMR warning this will put the brakes on investment in infrastructure projects in the meantime.
Local authorities find themselves caught between growing demand for services and pressure to implement budget cutbacks, according to the report.
Social crisis on the horizon
Writing in the report, CEMR Secretary-General Jeremy Smyth said that even if the broader economic picks up, the extent of public sector debt will hit citizens who rely on services provided by local and regional authorities.
"Whereas the European Commission, the European Central Bank and other international bodies believe that 2010 will see an economic and financial improvement in Europe, our local and regional authorities, by a large majority, expect 2010 to be either as difficult as 2009 or worse," said Smyth.
He said the impact on Europeans will be "direct and daily" if services are cut.
While government interventions served to insulate the public from the full wrath of the financial storm that ripped through the global economy in 2008 and 2009, it seems 2010 will be the year that the social impact is likely to be felt.
Wolf Klinz MEP, chair of the European Parliament's committee on the economic, financial and social crises, warns that the fallout from the crisis will be felt long after confidence is restored to financial markets.
"The effects on the real economy have already been substantial, with recession hitting various countries, but the real challenges will only become visible in the coming months. A social crisis is imminent," he said.
