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The Irish Rugby Football Union [IRFU] has told the country's four provincial teams that they will no longer receive extra money for player recruitment.
IRFU chief executive Philip Browne says each province received an extra payment of €250,000 from the IRFU in the 2015-16 season to assist with player contracts.
However, after the IRFU published their 2015-16 accounts confirming that the sport's governing body only broke even last year, Browne warned Ulster, Leinster, Munster and Connacht that there was no money left in the pot.
Browne warned the provinces that they must get used to the shifting of power in European rugby, and cut their cloth accordingly.
"All is change in the European rugby environment with the growing dominance of those clubs in France and England with deep financial pockets," he said.
"The size and quality of the playing squads that these clubs can assemble from around the world has changed the balance of power in Europe to the detriment of our provinces and the IRFU, who simply cannot match the playing budgets of these teams.
"It is becoming increasingly clear that the professional game in Ireland can no longer rely on the IRFU being the lender of last resort, as we no longer have the capacity to absorb the increasing cost of the professional game."
The RFU reported a 2015/16 turnover of almost €76m following the 2015 Rugby World Cup, with the Ireland national team bringing in €61.7m However, player costs rose by €6m, meaning the union only broke even in net cash terms.
Tom Grace, IRFU honorary treasurer, said: "It is no secret that the increased revenues available to French and English clubs are having a serious inflationary impact on player remuneration."
The IRFU also announced that they will allocate €1.2m for player development of in the 2016/17 season, an increase on the €800,000 earmarked for the 2015/16 season budget.
Browne wants the four Irish teams to be self-financing in future, by increasing the revenue from the Pro 12 tournament.
"An extension of this new European order is the difficulty that faces the Pro 12 as a competition operating in Ireland, Scotland and Wales — three rugby markets which are a fraction the size of those in England and France," he said.
"The revenues generated by the tournament need to increase significantly if the participating clubs are to remain competitive with the clubs in the English and French leagues. Such an increase in values will require some radical change to the tournament and how it is structured."