Clubs that overspend face the prospect of being banned from the Champions League and Europa League after UEFA approved new plans.
UEFA president Michel Platini has now passed rules which would force clubs to operate within their means.
Clubs will only be able to spend what they themselves generate.
Huge cash injections from wealthy benefactors as has occurred at the likes of Chelsea and Manchester City in recent years, would also be restricted under UEFA’s Financial Fair Play plan.
The system is being phased in and bans would not be imposed theoretically until the 2014-15 season at the earliest.
Clubs are required to restructure themselves over the next three seasons. During that period financial returns will be monitored and they will be expected, on average, to spend no more than they earn
Uefa general secretary Gianni Infantino said: “The main rule is the break-even requirement which will be phased in over the next three years.
“It is not as easy to swallow for everyone but everyone understands it is necessary. They are there not to punish clubs, they are there to help clubs. We don’t want to kill anyone, this is why we have a phased-in approach.”
Money invested in stadiums and youth development will not be included in the profit-loss account.
The rules will also forbid clubs owing money to their rivals, players and staff or the tax authorities at the end of the season.
Earlier this year, Infantino estimated 50% of clubs in Europe were making losses and 20% were in financial danger.
“If clubs want to spend €50, 60 or 70 million, why not, provided they have the money coming from their revenues, this will continue in the future. The problem is when you don’t have the money,” Infantino added.
The European Clubs’ Association’s president, former German international Karl-Heinz Rummenigge, welcomed the move, commenting: “The measures will shape the future of European football into a more responsible business and ultimately a more sustainable one.”
