Saturday, March 27, 2010

Impending UEFA Crackdown on Big Spenders

The Times of London sounded the alarm back in November with this article and now it appears imminent that UEFA will restrict the big spending habits of some of Europe's richest clubs.

In a 60-page plan being worked up at UEFA headquarters in Nyon, Switzerland, clubs would only be able to spend only what they earn and not be allowed to take on large debts (and operating at a loss) to fund player acquisitions.

The entire effort is an attempt by UEFA president, Michel Platini (pictured above), to end what he calls "financial doping" – in which wealthy owners underwrite huge losses, and transition to a system where clubs can only spend what they earn.

These proposals, which UEFA intends to bring online 2012, will permit owners to fund losses for a transitional period but under close scrutiny by the governing body. Initially losses of up to €45 million would be acceptable in the three years up to 2015. After that, the number will drop to €30 million over the next three years, with UEFA finally reaching a point where clubs are breaking even.

It seems these proposals are intended to fulfill two objectives. First, the ensure the solvency of Europe's biggest clubs to ensure their financial survival in tough economic times and secondly, to level the financial playing field in the European game; bolstering competition and making the leagues more attractive to fans who are tiring of seeing the same handful of clubs win all the trophies.

While much of the attention in the English language press has focused on the Premiership clubs, the need for these new rules is most starkly displayed in the Spanish Primera, where club revenues average €72 million but average net debt is €860 million - the kind of ratios we're used to seeing in failing Wall Street banks, not big football clubs.

Will these new rules have the desired effect or will clever owners find a way to circumvent them, by (for example) funding player bonuses through advertising schemes, etc? Or, will the big clubs. with broad brand recognition, continue to outpace the smaller clubs in revenues and stay on top? Only time will tell but its obvious that you won't see much change on this until the 2018-2020 timeframe when the policy (if it survives) is fully in effect and operating through two full transfer cycles.

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