The report by the London School of Economics, the Royal College of Psychiatrists in the UK and the NHS Confederation's Mental Health Network says the psychological impact of the recession is heaping pressure on health services at a time when public spending is being cut.
Experts warn that stress means more people are seeking help, but health and social service waiting lists are growing.
Cutbacks in social care are causing delays in discharge from psychiatric hospitals, according to the report, meaning doctors cannot see new patients.
The tension between the need to curb public spending and respond to rising demand for services is likely to become ever more of an issue as governments struggle to balance budgets in the wake of the financial crisis.
Last month, EU Health Commissioner Androulla Vassiliou warned governments against cutting health services and urged them to step up investment in new health technologies instead (EurActiv 06/10/09).
Martin Knapp, professor of social policy at LSE and co-author of the report, said slashing health spending now might be attractive in the short-term but will lead to problems in the long-term.
"Unemployment, debt and poverty cause enormous stress. This would be absolutely the worst time to cut prevention budgets or treatment services," he said.
Knapp called on public health services to find ways to prevent as well as to treat growing needs.
The report suggests that mental health services can be made more efficient by a radical redesign of care services led by healthcare staff and managers. Avoiding situations where individuals are repeatedly assessed by different professionals is one area that could be addressed, it says.
The authors also call on governments to provide support for employers to keep people with mental health problems in work.
