Mayor Sir Peter Soulsby has warned "appalling choices" will have to be made when it comes to setting Leicester City Council's future budgets.
Sir Peter is in the early stages of determining what cuts will have to be made from the authority's budget in the next financial year, starting in April.
About £38 million is being cut from the budget this year and finance bosses expect there will be a further £3 million gap between the council's income and its spending in 2013-14.
Labour mayor Sir Peter accused the Government of making savings needed at Whitehall by stripping down local government budgets.
The largest chunk of the council's income is the revenue support grant from the Government. Next year, that will be £110 million but city council finance officers estimate it will have dropped to £63.2 million by 2016-17.
Sir Peter said: "We face some appalling choices in the years beyond next year.
"Leicester is inevitably being forced to look at the fundamentals of the services we provide.
"The Government says it is giving councils more freedom in their finances by allowing us to do things sich as keep our business rates.
"It says if the economy grows we will get a greater income from that, but its policies have meant the economy is bumping along the bottom."
When pressed on what services may have to be cut, Sir Peter said it was too early to pick out individual departments. However, he said: "At this stage all we can say is we have to have some discussion with the voluntary and community sectors."
Sir Peter said hundreds more job losses could follow next year, but would not be pinned down on a figure.
