Financial Fair Play: The Financial Lanscape Of European Football

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Financial Fair Play: The Financial Lanscape Of European Football
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On Thursday, May 27, 2010, UEFA's Executive Committee unanimously approved the new UEFA Club Licensing and Financial Fair Play Regulations.

According to an interview conducted with UEFA General Secretary Gianni Infantino, the purpose of the new rules is to have, "A set of rules, to have a better financial structure in European club football."

One of the new rules regards overdue payments between clubs and players. The idea is to make sure that transfer fees paid to the former club of a new player are paid as agreed. There have been instances where clubs have won the competition for a player's services, only to delay payment to the former team. This rule also extends to timely payments of wages paid to players.

The highlights of the new rules are:

  • Squad size limits - each club is limited to 25 players, with an unlimited number of under-21 players allowed. England has since added a provision for the Premier League that of those 25 players, eight have to be homegrown of either English or Welsh origin. 
  • Breakeven - clubs generally can't spend more than they earn in revenue over a three-year period. UEFA wants to encourage clubs to spend money on the infrastructure of the club. Thus, any money spent on club infrastructure or youth academies would not be counted in the breakeven calculation. In this way, UEFA is trying to encourage clubs to invest in their own futures. This makes sense since it will help a club to grow organically (based on its youth system) as opposed to the richer clubs poaching big time players away at higher and higher costs. 
  • Oversight - in the past, UEFA relied on its member organizations (the domestic federations like the English FA) to ensure its rules were implemented. There was concern among some clubs that not all nations were fully implementing the rules, so an independent regulatory panel called the Club Financial Control Panel will oversee the implementation of these rules across all member organizations.
  • Sanctions - depending upon the severity of a transgression, UEFA has a variety of sanctions which it can impose on a club. The can include: warnings, fines, transfer bans, point deductions, and in the most serious cases, exclusion from UEFA competitions (including the Champions League).

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The new rules come on the heels of UEFA's licensing and benchmark report on European club football. The aggregate loss of Europe's top clubs was 578 million Euros. Nearly 65 percent of income was spent on salaries with 47 percent of clubs reporting losses.

UEFA's attempt to regulate the inflationary spiral of spending in world football is commendable. In the wake of the Great Recession, and the sovereign debt crisis rapidly spreading throughout Europe, the implementation of these rules is timely. We'll have to wait for 2012 to see how much bite these new rules have.

In an extreme case, UEFA has the power to ban a team like Barcelona or Real Madrid from the Champions League. At this stage, I wonder if that is an empty threat.

On its face the new rules sound like a major boon for European football. We'll have to wait and see how serious UEFA really is about implementing them.

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