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Can football's finances be fixed?

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The governing body of European football this week fired a noisy shot in its crusade it plans to wage against the fiscal irresponsibility of the continent’s clubs under the banner of Financial Fair Play.

UEFA, like other European organisations, is worried about spiralling debts and the apparent inability of its members to control their spending. According to UEFA, more than half the clubs in Europe’s top divisions lost money in 2010. Their total losses were €1.6 billion and their debts  €8.4 billion. Clubs cannot pay their tax bills, the increasingly fat contracts they offer players, and, worst of all from UEFA’s point of view, the transfer fees they owe other clubs. This creates a domino effect, since selling clubs often rush out and use the money to buy new players.

Since 2009, UEFA has been working on a set of rules to rein in spending. It plans to phase these rules in by 2018, starting in earnest next summer. One constraint is that UEFA has direct authority only over the club competitions it runs: the Champions League and the Europa League. It can only punish teams that qualify for those competitions.

Earlier this year, UEFA banned two indebted Greek clubs, AEK and Panathinaikos, and two from Turkey, Bursaspor and Besiktas, from its competitions. This week, UEFA took aim at clubs that had fallen behind in payments, principally to other cubs. It announced that it would be withholding their share of the central pot from 23 clubs that had played in the Champions League or Europa League last season. That list included Atletico Madrid, which won the Europa League last year, as well as another Spanish club, Malaga.

The fact that Greeks and Spaniards have been living beyond their means may not come as a surprise. But the prospect of swathes of second and third tier clubs across Europe going bankrupt and bringing others down like dominos is, of course, terrifying for UEFA. Yet the question remains whether the smaller clubs punished this week are simply collateral damage in the first skirmish in a war among members of football’s 0.01 per cent: a battle between the sport’s old money and its nouveau riche.

Clubs like Chelsea, Manchester City, Paris Saint-Germain and Zenit St Petersburg don’t seem to care what they spend or how much they lose. Their spending has made them the motors of inflation at all levels of European football. The new rich are threatening to usurp the clubs who regard themselves as football’s rightful aristocracy, AC Milan, Real Madrid, Manchester United, Arsenal and Bayern Munich, who, with their grand stadia and huge fan bases, generate far more revenue than their upstart rivals but whose owners are not able, or willing, to dip into their own pockets. The old rich will be the big winners if the Financial Fair Play rules succeed in forcing clubs to match expenditure to income.

Yet with only a year before UEFA is going to start asking clubs whether they have balanced books, the new rich keep spending as if nothing was changing. The top three clubs in the summer mercato were PSG, with an outlay of €147 million, Chelsea, boosted by the €60 million it collected after it won Champions League (€100.3 million) and Zenit St Petersburg (€95 million).

In theory, FFP will force clubs to live within their means. In practice, the men from Nyon have allowed the rules to develop more holes than Gruyere. In the first two years, owners will be able to subsidise clubs by as much as €45 million, contracts signed before June 2010 won’t count, clubs will be able to amortise transfer fees over the length of a player’s contract and, best of all, clubs will be able to plead that they have a financial plan that is moving in the right direction.

Other problems loom. The European Commission has said that the rules are consistent with the EU State Aid policy. UEFA says any disputes must be resolved in the Court of Arbitration for Sport. But that does not mean club owners won’t go to the European Court.

With so much money slopping around its hardly surprising that is has seeped into embarrassing places. The Russian and Gulf billionaires are acting as if they expect to be able to face down UEFA and its bureaucrats. How you expect this story to play out depends on how you think battles between the super-rich and the authorities tend to go in the 21st century.

Peter Berlin
Short author bio and social media links goes here.