As the F1 cavalcade rolled into Monte Carlo yesterday for the most prestigious Grand Prix on the calendar, Ferrari remained locked in a major dispute with the FIA, with the Italian team having apparently painted itself into a corner after failing to convince a court in Paris that it should be allowed an injunction against the sport's governing body to prevent it introducing the new £40m 'budget cap' regulations for 2010.

Ferrari's argument was that it was impossible to reduce the size of their F1 operation to the proposed new limits within the timescale available, leaving themselves with only two starkly defined options. Either they climb down and meekly submit their entry for the 2010 title chase, which is due by 29 May, or it decides to break a 60 year love affair with the sport's most important category and pursue racing elsewhere.

Ferrari insists it is not intimidated by the FIA's claim that it has plenty of interest from new teams and, to be fair, the governing body hardly enhanced its own credibility by listing a scarcely credible selection of new teams, most of whom, while doubtless showing an interest, have little chance of being ready for the start of next year.

Ferrari issued a statement yesterday which dramatically raised the stakes;  "If it is not possible for all parties to reach agreement, the team will continue with its decision of the main (Ferrari) board taken on 12 May (and) Ferrari will not enter its cars in a competition that, with the planned scenario in place, would see a watering down of the character that has endowed F1 with the status of the most important racing category in the world."