The Spanish national football team and the country's club sides could be banned from all European competitions.
Fifa president Sepp Blatter has issued the warning over fears that the government is over-involved in footballing matters in the country.
Mr Blatter made the threat after claims that the Spanish government is trying to intervene in the Spanish Football Federation's election process.
It is because of a rule in the country which means that all non-Olympic sporting federations must hold elections before the Beijing Olympics this year.
"Spain would not be able to play at Euro 2008 and their clubs wouldn't continue in Europe," warned Mr Blatter.
"A confrontation like this is no good for football or for the government," he added.
Ahead of the 2002 Fifa World Cup, Greece narrowly avoided being banned from international competitions.
It followed a change in the laws in Greece which Fifa said amounted to government interference in the game.
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21 October 2010
21 October 2010
21 October 2010
20 October 2010
20 October 2010
