Watford today blamed the financial crisis surrounding the collapse of ITV Digital for the sacking of Gianluca Vialli as manager last week.

Vialli's three-year contract was terminated on Friday with two years left to run after the club's costs rose by a reported £4m in his first six months in charge.

The Italian's record had come under increasing criticism from the Vicarage Road board after a glut of big-name signings were offered Premiership wages but failed to win the club promotion.

Chief executive Tim Shaw admitted in a statement today something had to give and said: "These are the worst times I've known for this club.

"The main reason behind most of the current decisions is the club has to reduce its costs in order to ensure future financial stability.

"We must not bury our heads in the sand. Our club has just been denied a future-guaranteed income of at least £2m for each of the next two years. This is not the club's fault.

"Given we have to reduce our costs, we simply cannot now afford to keep Luca as our manager.

"However, I do accept that as well as this we wished to change a part of the team management which was not in line with Luca's wishes."

Watford dismissed Vialli's number two Ray Wilkins earlier in the week, along with fitness coach Giovanni Vaglini, doctor Ian Beasley and masseur John Kelly.

But the former Chelsea coach refused to quit and will seek a costly pay-off from the club, who decided last season's 14th-place finish in the First Division was scant return for his high salary.

A huge leap in the wage bill at Vicarage Road made the collapse of the Football League contract with ITV Digital's parent companies Carlton and Granada all the more costly for the club.

Watford have shelved plans for a new stand at the stadium and Shaw will ask nine senior players to accept a "suspension to part of their wages" this week in a desperate attempt to balance the books.

But he has no doubt where the anger of supporters dismayed at the club's problems should be vented and hopes to set up a fans forum where they can make their views known.

He added: ""For those of you that think the board should resign, I'd like to say two things - your frustration should be directed at Carlton and Granada, not us.

"Even if you don't agree with this, any new board would need to bring with it substantial amounts of money to invest direct in to the club.

"As yet nobody has come forward with such an offer, but I'd love to hear from them if there is interest."

Watford are looking for a new chairman after Sir Elton John's resignation last month following five years at the helm left the club in limbo.

They do not yet have a replacement lined up for Vialli, with reserve-team manager Ray Lewington taking over until an appointment is made.

Shaw said: "Contrary to popular belief, we do not have a replacement lined up - I would love to have been in a position where he could have stayed.

"For the time being Ray Lewington will take temporary control of the player management and for the record I can think of nobody I would rather have help us in these circumstances.

"We will wish to interview a number of candidates for the position and so this will take some time."