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Premier League Teams Should Adopt German Tactics to Beat New UEFA Rules

Photo by Probek

Three-quarters of the Premier League’s clubs will need to significantly reduce their spending on players’ wages if they are to qualify for European competitions after Uefa’s “financial fair play” rules are introduced. The European governing body’s executive committee is set to approve the regulations, which will require clubs to breakeven, and not make persistent losses, from 2012-13.

In 2008-09, the most recent year for which the Premier League’s 20 clubs’ accounts are published, 14 made substantial losses. One other, Blackburn Rovers, made a £3.6m profit but were subsidised with a £5m loan from the club’s owners, which will no longer be permitted. Most clubs in the Premier League are funded by owners, most spectacularly at Chelsea and Manchester City, where Roman Abramovich and Sheikh Mansour subsidised losses of £47m and £93m respectively. Owners will, according to the rules, be permitted to invest in clubs, via permanent shares rather than repayable loans, to build solid infrastructure such as training grounds or youth development facilities, but not overspending on wages or transfers.

Uefa has taken more than three years to develop the rules since the organisation’s president, Michel Platini, warned of the “danger to football” posed by debt, overspending and “rampant commercialism”. They will be phased in, with club owners allowed to subsidise €45m (£38m) losses over the three years from 2012-13, reducing to €30m intotal over the next three years.

The truth is, the economies of the other leagues are torn to shreds and bursting at the seams. The Germans’ foresight and willingness to act unprompted puts to shame the inclination of the other leagues to turn a blind eye, cross their fingers and hope. In fact, to describe the financial state of European football as a mess would be a gross understatement.

The model in the Bundesliga means that the clubs are debt-free and can pass on the benefits to the fans, who pay as little as £11 to go and see the mighty Bayern play. Season tickets are similarly much cheaper and to become a “member” at Schalke for example will set you back a mere £86. You can’t even accuse them of having such cheap prices to simply get bums on seats. According to Deloitte’s Annual Review of Football Finance in 2009, the German top division had an average of 8,000 more people per game than their English counterpart, while the Premier League suffered a loss in revenue over the same period. UEFA is all too aware of this. As of the start of the 2012 season, new rules will be in place which, the governing body hopes, will curtail this culture of “spending at will” within the current elite. Plans were announced in 2009 to give the continent some time to basically pull its finger out and get its finances in check. These clubs are a long, long way off meeting the criteria.

Serie A has plans to emulate an English idea. In May 2009, 19 of the 20 league sides voted in favour of separating from Serie B and forming a breakaway league, similar to the English Premier League. Italian sides came under fire after only Udinese reached the quarter-finals of a continental competition in their 2009 UEFA Cup campaign. The clubs argued that they were unable to compete with the wages in England and Spain. Lega Serie A went live on July 1st, 2010 and on the same day, Lega Calcio folded; leaving the top sides free to sign their own TV contracts and establish their new division. They’ll have to wait two years however, as the defunct Lega Calcio had already signed €1.7bn worth of deals with Sky Italia, Mediaset Premium and Dahlia TV. The Serie A clubs do have control of the income and what’s rather concerning is that it is up to them to decide how much of the money, if any, should filter down into the leagues below them.

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  1. tim

    April 28, 2011 at 11:39 am

    no worries guys, according to newspaper reports ,england will be out of eu very soon, weve had enough of being told what to do, the foreigner allowed rule of players in teams, will be kicked out, and english players will be foremost again.

  2. Pakapala

    February 19, 2011 at 11:36 am

    “The Germans’ foresight and willingness to act unprompted puts to shame the inclination of the other leagues to turn a blind eye, cross their fingers and hope.”

    Something that is lost in the discussion about proper financial standing of clubs, is the model of the French league. It too has a very good strict and sound financial standing plan for clubs willing to play in the league. 2 or 3 years ago, when it was mentioned how important and well intentioned a regulation like that was and how leagues like EPL and La Liga should be forced by UEFA to follow similar regulations, people were making fun of the idea and found it laughable at best and an affront to the dominance of those leagues. Now people are singing a different tune.

  3. Mark

    February 19, 2011 at 2:00 am

    The UEFA FFP rules are nothing like a salary cap.

    The UEFA rules will keep big clubs big. Every league will have the 1-4 clubs that qualify for CL and this will not change much at all. CL (and to some leagues EL) are worth so much money that if a club qualifies for a couple of years in a row, that revenue will be put back into the club. Clubs that do not qualify will rarely be able to compete. This also stops clubs from becoming the new Man City or the new Chelsea. The big clubs wanted these new rules. This will keep the big clubs from going broke and reduce competition from rich owners of smaller clubs.

    I think that almost all the big clubs will have little difficulty meeting the regulations except for, maybe, Inter and AC Milan.

  4. Guy

    February 18, 2011 at 3:48 pm

    Do I sense rational discussion on this thread? Enough of that you freakin’ MORONS!!! 😉

  5. Dave C

    February 18, 2011 at 12:56 pm

    I’m no expert on employment law, contract law or whatever else, either in the UK or the EU in general (or elsewhere for that matter), but here are my thoughts on the idea of a salary cap:

    1. It would definitely have to be European-wide (otherwise, the players would simply flee from the countries with salary caps to the countries without salary caps). Even if it was European-wide, Europe in general would experience the threat of top players fleeing to Russia (or the middle-east, S. America, MLS etc). I guess you just have to hope that these other countries, even without the cap, couldn’t offer the kind of money available in Europe.

    2. Even if the cap was Europe-wide, it would be complicated due to tax-laws. If income tax in general was lower in Spain than in the UK, players would be drawn to Spain, where there after-tax earnings would be greater.

    3. Even if a salary cap is technically illegal by EU law (and again I have no expertise on this idea), couldn’t the clubs enter into some sort of voluntary gentleman’s agreement on the issue? I suppose that might break some kind of price-fixing/competition&monopoly/cartel kind of laws, and maybe the top clubs would be less inclined to agree. But perhaps it could be a part of competition rules – just as the EPL has technical requirements regarding stadium facilities that must be met in order to play in the league, perhaps all UEFA leagues could incorporate a clause saying that you could only pay players no more than $X amount of dollars.

    In the long run, if UEFA could enforce all clubs to abide by such a rule, it would be in everyone’s interests. It would limit the expense of player salaries, and thus leave more profit on the bottom line for the owners.

    • Bishopville Red

      February 18, 2011 at 4:43 pm

      To question 3:

      A salary cap is essentially a restraint of trade which is illegal under EU laws. A player who proves he’s good enough but can’t get a contract with a “capped up” team is all you need to blow open that can of worms. Actually, released players from teams trying to make a cap limit would be all you need. for the next Bosman-esque court case

      Before you could even attempt this, you would need a players’ union that at least spanned Europe, to collectively bargain and agree to these rules. Cut since South America is a wellspring of players, you find another wrench.

      If you go with the voluntary gentlemen’s agreement, you will find out two things very quickly:
      1) There are no gentlemen in football
      2) Collusion is illegal. Peter Uberroth tried it when he was Commissioner of Major League Baseball and it cost the owners $280 million in 1990. In 1989, Michael Knighton tried to buy Manchester United for the unprecedented sum of £20 million. Last week the Glaziers put a £1.6 BILlION price tag on them. Not too hard to figure out how disastrous collusion could be to football owners.

  6. brn442

    February 18, 2011 at 10:17 am

    I’m too scatching my head. The writer doesn’t even elaborate on the thesis of his article – WHAT IS THE GERMAN MODEL?

  7. Guy

    February 18, 2011 at 9:41 am

    @jose—one of our English readers can answer this better, but I believe I remember several of them pointing out that a salary cap is basically “illegal” under EU laws.

    @Clive—What IS the German model?

    • Clampdown

      February 18, 2011 at 9:50 am

      I second Guy’s question to Clive.

    • tonyspeed

      February 18, 2011 at 10:17 am

      50% + 1 vote of the voting power in the club belongs to the members of the club, in other words fans who buy a “voting share” in the club. Therefore, they can never be completely controlled by an outside investor that is intent on destroying the club (glazers etc).

      Also, they have to submit their budget and there are checkups to make sure they are financially feasible in order to stay in the league.

      • Clampdown

        February 18, 2011 at 11:25 am

        Thank you.

      • ExtraMedium

        February 19, 2011 at 6:24 pm

        “Therefore, they can never be completely controlled by an outside investor that is intent on destroying the club (glazers etc).”

        Huh? Why would someone spend millions in order to *intentionally* lose millions when EPL teams could potentially make millions, with $1+B valuations?

        Or by “destroying the club,” do you mean changing the culture?

    • Manamongst

      February 18, 2011 at 4:08 pm

      Article 81 of the EC Treaty…similar to Section 1 of the Sherman Act.

      that would be the only thing that comes close. UEFA always brings up the argument that free economic competition as provided by the EC treaty cannot be applied to soccer without taking the specificity of soccer into account.

      • Guy

        February 18, 2011 at 4:26 pm

        That would be UEFA howling into the wind?

  8. tonyspeed

    February 18, 2011 at 9:37 am

    basically that is a glorified salary cap. platini doesn’t feel the need to “dumb-it-down” for teams like they do in america. as long as this gets the glazers out of manchester, i’m ready for it….come what may.

  9. FC Asheville

    February 18, 2011 at 8:46 am

    Good luck with a salary cap accross Europe and UK….clubs are still businesses and you would be dealing with endless labor disputes in various countries with unique labor laws. The only people who win would be the lawyers.

    • Manamongst

      February 18, 2011 at 4:02 pm

      Not many teams make money the way Newcastle did. A player is not a stock commodity, although he ca be, but most owners don’t aquire players for that reason. They do it to put butts in the seat, as well these players grow a teams merchandising visibility. But if you want to see a Man U. just now spending the C. Ronaldo jersey money, go right ahead. Yes clubs are still businesses, and a salary cap only helps that.

    • ExtraMedium

      February 19, 2011 at 6:19 pm

      European labor laws are far more pro-worker than American laws. FC Ashville is right. Lawsuit after lawsuit after lawsuit. I give Financial Fair Play 5 years after the first suit is filed before a court decides it’s collusive and therefore illegal. No business has a right to exist.

  10. jose

    February 18, 2011 at 8:24 am

    platini has looked at the model here in america, i still can’t understand why not a salary cap. it will achieve two things, no more clubs in debt due to their overspending on players and fair play. when you win a trophy you earned it not bought it. that in itself will bring more competition to the premiership.

    • Martin

      February 18, 2011 at 9:51 am

      But the salary cap structure here in America is flawed when you have teams that will gladly pay the luxury tax on over paying their players in order to remain competitive. Look at the NBA where trading an expiring contract is sometimes more valuable than the other player being traded. Also, the salary cap helps to decimate winning teams, look at the Chicago Blackhawks this season compared to their Stanley Cup winning season just last year. They are a shell of what they were last season due to having to get under the cap. You have teams that strive be so far under the cap to help get subsidies from their leagues to remain profitable but in turn the performance on the field is vastly subpar (think Pittsburgh Pirates).

      I don’t think there will ever be a “financial system” that makes fans, players and owners equally happy. Especially if you are a fan of Blackpool compared to being a fan of Man City. What good does a salary cap do there? Blackpool would never reach it and Man City would have to get rid of so many players to get under it. Besides who’s to say Man City’s owner wouldn’t just pay the luxury tax (if it existed) in order to keep his team near the top? But if you threaten with Champion’s League restrictions based on that salary cap, what’s to stop the Sheik from just selling his team and then bringing in a shrewd owner who doesn’t want to invest in the team? More interested in getting his EPL payments and being profitable no matter what the team does on the pitch.

      It’s a difficult situation to which there is no real solution in my view.

      • jose

        February 18, 2011 at 10:34 am

        martin, you make a great point. but the alternative of doing nothing as things are, is unacceptable. i see the flaws that you point out but i think those flaws are not worse then how things are now.

      • Manamongst

        February 18, 2011 at 3:21 pm

        The flaw of the American system of salary cap is that it is not means tested as to where the cap would/will be. In other words a Blackpool would be means tested and their annual salary cap would be set @ 5-7 mil and a Man City would always be at the maximum allowable, lets say at 55 mil, both things are equal, but both teams would have to put forth a real effort to stay under it. And should a Blackpool come into a nice piece of change they could be re-evaluated. Also, it would help if the local municipalities took part ala a Green Bay Packers. An NFL version, similar to sports socialism would be the most preferable in my opinion.

    • Up the Chels!

      February 18, 2011 at 9:54 am

      Salary caps are problematic when you have multiple countries and multiple currencies to deal with. If England adopted a salary cap, what would then stop the top players from going to Spain where there may not be a salary cap. EU laws regarding compensation for work and freedom to work make it additionally challenging to implement rules in the EU leagues. Even with that, what would stop the Russian League from not adopting a salary cap?

      • Manamongst

        February 18, 2011 at 3:54 pm

        Actually they’re not…the salaries are only scaled with the country’s league, people keep looking at the cap like it’s this grand answer key for a test. Just look at each league as a different teacher’s class of course they are covering the same material but of course their tests don’t/may not resemble one another. Besides, the biggest hurddle would be the Pounds to Euro conversions, not to mention most teams valuate their internal currency to one of the two, most likely the Euro.

        Let a Russian team not adopt a salary cap, and they would be crushed under their own weight…besides let the best/most money grubbing players get saddled on that island if they like. No CL no Europa league, that’s really going to attract the best and brightest to Russia…next to the weather and the Borsch.

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