"The (financial) situation in formula one is clear and if there is no response, the sport will eventually decay by a shrinking field of starters," he told the German-language website motorsport-magazin.com.
He said even the smaller, struggling teams are spending big in order to create the impression of financial health "that is not true".
For example, Louis said small teams use five-star hotels, which "From a business perspective is absolute nonsense".
The same teams, he added, are driving up salaries.
"A person who was strategically very important for us and was in the salary range of 90-100 thousand a year was lured from us with 180,000 pounds," said Louis.
Even a worker in the factory, earning in the mid-30,000 pounds range, was lured from Lotus with a higher salary "from teams that were far behind us in the championship standings".
Louis said those teams then complain about escalating costs "That they themselves have driven".
"For me, it's economic suicide," he added.
And it's the rising costs, Louis revealed, that led to the decision to overlook the obvious preferred choice Hulkenberg in favour of Pastor Maldonado, who brings millions to the team in the form of PDVSA backing.
"At some point you have to make a decision and accept that as a team you need to get a budget together," he explained.
"For me, Hulkenberg is an excellent driver. One of the few talents there are.
"I'm not saying that we made compromises, but we decided to invest more time in a driver (Maldonado) who to a large extent is comparable with where Romain Grosjean was with us in 2012.
"He (Grosjean) was criticised, we were called completely crazy to keep him, and now the same people are saying he's a great driver," Louis said.