The Principality team, who achieved direct qualification for the UEFA Champions League, have debts estimated at between €53m and €87m. The LFP's financial committee met with Monaco officials last week, hoping for financial guarantees to be given, but apparently failed to get them.
Monaco, who were league runners-up behind Olympique Lyonnais, said they would appeal against the decision. "We have learnt about the LFP's decision and we do not share their views. As a result, our lawyers will appeal in due course," the club said in a statement.
According to sports daily L'Equipe, Monaco would need to find around €25m to avoid demotion as their participation in the Champions League next season would realise much-needed funds. Monaco made a loss of €15m in 2001 and failed to pay their players' wages on time earlier this season.
In October last year, French media reported Monaco had been forced to borrow around €180m to make up for debts for the two seasons they failed to play in European competition.
Monaco have been looking for investors to take over the club and pay their debts all season. But a plan proposed by current club president Jean-Louis Campora was rejected by Prince Rainer because the main bidding firm was facing legal problems. A group of Italian businessmen had also expressed interest in the takeover but insisted on coach Didier Deschamps being replaced.
Monaco also won their first League Cup this term and players said they had done their job on the pitch and were now hoping for a solution to be found. "We were not necessarily expecting this even though it had been looming since December," said midfielder Jérôme Rothen.
A great season
"We've still got a week ahead of us to find a solution. And I hope they will find one because we've had a great season sportswise," he added. Rothen, one of France's most coveted players, said he would probably leave if relegation was confirmed by the appeals court. "Obviously, it would not be interesting to stay, but we're not there yet," he said.
Monaco have always had the reputation of being a wealthy outfit, benefiting from the royal family's generosity, but Campora has always stated the club's wealth was a myth.
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