How Bayern Munich and Bundesliga Would Benefit from Financial Deregulation

Clark Whitney@@Mr_BundesligaFeatured ColumnistJanuary 22, 2015

In this picture taken  Saturday May 17, 2014, Bayern Munich's  CEO Karl-Heinz Rummenigge  speaks during the after-match party after the club won the German soccer cup final  against Borussia Dortmund in Berlin. (AP Photo/ Alexander Hassenstein,Pool)
Alexander Hassenstein/Associated Press

For almost 15 years, one of the biggest factors setting the German Bundesliga and other top European football leagues apart is the strict regulation of the finances of its clubs.

Long before UEFA's Financial Fair Play rules were agreed upon in September 2009, clubs in the German top flight had been subject to similar "fair play" regulations to ensure the commitment of clubs to their fans and promote organic competition.

Each year, clubs must apply for a license to participate in the top flight the following season. The German Football League (DFL) reviews every club's documents and only gives approval when it is clear the club is at no risk of insolvency. Those clubs that do have a deficit have their transfer spending limited so that they may only sign new players if they sell others for as much money or more. And no individual may own more than 49 percent of a club, the exceptions being grandfathered-in factory teams Wolfsburg, Bayer Leverkusen and Carl Zeiss Jena.

The Bundesliga's regulations were initially intended to create a sustainable model and maintain the league's culture. While the likes of Roman Abramovich were buying foreign clubs and giving them immediate financial support to sign players that would eventually catapult them to the top, German sides were limited to more organic growth.

In the Champions League, Bundesliga teams suffered, as even Bayern Munich spent most of the 2000s as a side only ever capable of reaching the quarter-finals. Others such as Werder Bremen became a laughing stock as they fell emphatically, their 7-2 defeat to Lyon in 2005 a prime example.

On the plus side, the inability of German teams to sign and pay the wages of foreign stars forced clubs to focus on youth academies that have in recent years become the envy of Europe. Germany's youth national teams have won four titles since 2008. After humiliation at Euro 2000, the senior side have been semifinalists or better in every tournament since 2006, their crowning achievement coming when they won the World Cup in Brazil last summer.

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With the likes of Abramovich at Chelsea, Sheikh Mansour at Manchester City and many others, the England national team has suffered massively. Young players have little chance of succeeding in the Premier League due to the immense spending power of English clubs that result in even modest teams having enough star power to keep rising talents benched.

There's a trade-off, however. Since 2004-05, the Premier League has been represented by eight Champions League finalists, including three different winners. On the other hand, the national team has not passed the quarterfinals of any major tournament in that time, failing to qualify for Euro 2008 and being knocked out in the group stage of the 2014 World Cup.

In Germany, financial limitationsspecifically those on foreign ownershiphave had the exact opposite effect. However impressive talent development has been in Germany, as witnessed in the performance of Joachim Low's national team, it's had a negative impact on the Bundesliga.

At present, the German top flight is noncompetitive—as Bayern dominate. The record 24-time German champions have won the league in record-setting time in each of the last two seasons and entered this season's winter break with a greater advantage than ever before.

Chiefs at other Bundesliga clubs are increasingly voicing their concerns about the league's relevance. On Wednesday, German magazine Kicker published an article in which Leverkusen sporting director Rudi Voller claimed that it is impossible to catch Bayern.

"There is a gap which you will never be able to closethat's the one between FC Bayern Munich and the rest of the league," he said, per ESPN's Stephan Uersfeld.

The same article quoted Cologne boss Jorg Schmadtke as saying that although Bayern's dominance is not yet a huge problem, "in the long run it would not be good for the league if clubs are only playing to finish 2nd to 18th. At the least, you should be able to name clubs like Dortmund, Leverkusen or Schalke as candidates for the title in the summer."

Schmadtke has a point in that as recently as 2012, Dortmund ran away with the Bundesliga title. However, the DFL has always been proactive in setting the right course rather than waiting for disaster to take action. Their willingness to address systemic problems in the league's youth development in 2000 is the difference between Germany's success in recent years and, for example, the failure of Italy at the last two World Cups as the Italian FA (FIGC) sat on its figurative hands.

The Bundesliga needs to be on the right track, and one way to set a proper course is to ease financial regulations.

On a financial level, Bayern have long been ahead of the rest of the Bundesliga. But the gap has widened massively in recent years, with Thurday's release of Deloitte's annual Football Money League report highlighting the gap: Bayern earned €487.5 million during the 2013-14 campaign, almost double Dortmund's €261.5 million. Schalke ranked third among German teams with €213.9 million.

The problem now is that Bayern are so much richer than their opponents that—despite not even three years having passed since they last were pipped to the title—it's hard to see any other team winning the German league in the long term. It's Bayern's to lose.

Even when Dortmund won back-to-back titles, Bayern remained Germany's biggest and best team, and it could be argued that had BVB been burdened by Champions League football in the springtime, they may well have folded under the pressure of competing on multiple fronts. Prior to Jurgen Klopp's side winning the title, Wolfsburg and Stuttgart were champions in 2009 and 2007 respectively, both sides at the time also not having the burden of playing in Europe's elite club competition.

Football often is cyclical and some may claim that Bayern are approaching the end of an era, with many key players above the age of 30. And team quality is something that comes and goes as players grow old and transfers occur. However, revenue is something that is far more sticky. For example, even after falling out of the Champions League for four seasons, Liverpool only once slipped out of the top 10 richest clubs.

The key to the Bundesliga's long-term success is not to bring down Bayern but to raise up the rest of the league. The Bavarians achieved their success organically, which is impressive and ought to be respected. They started from a generally level playing field and were the most successful club as German football grew.

The task that aspiring clubs now face is a different and altogether more difficult one, with Bayern and foreign powers all capable of plucking away their players. As seen with the rise and fall of Dortmund, sustainable and organic growth is almost impossible—even in the midterm.

Hannover have long been opposed to the "50+1 rule" that requires German clubs (the factory clubs being exceptions) to be majority-owned by fans, the club even claiming in 2010 that it is an illegal limitation, per per World Sports Law Review). Hannover's position was made clear in a release on their official website.

In light of recent developments across football, it seems the only viable solution is to change the regulations that make it impossible for other clubs to compete with Bayern. Elsewhere, lax financial restrictions have made the difference, as Manchester City and Paris Saint-Germain have benefited massively from ultra-rich investors injecting otherwise ordinary clubs with cash. Atletico Madrid have benefited from the Spanish government's ignorance of their tax debt and are now competitive even with giants such as Real Madrid and Barcelona.

Some may worry about the implications of such changes on the success of the national team, but there's reason to believe that an England scenario would not arise if German clubs were open to unrestricted investment.

For Abramovich, the options were clear: Spend several years revamping Chelsea's academy system and bringing it up to speed or investing heavily in big-name transfers immediately.

In Germany, the first- and second-division clubs have already paid their dues, so to speak; they couldn't spend liberally and German club football struggled to compete for most of the 2000s. Now, there are few academies in professional German football that are not elite. Most clubs far and away exceed the minimums the DFL has required of them in order to be licensed; academy development has become part of league culture.

Where extra investment would more likely help the German league is in ensuring clubs could keep their rising talents for longer. It's understandable for a player like Sinan Kurt to leave Borussia Monchengladbach for Bayern when it means an enormous raise. The Fohlen would never be able to match Bayern's salary offer, but if they were able to give a more sizable sum, it could have kept their most talented academy prospect at Borussia-Park for a few more years—at least enough time for him to command a greater transfer fee and for the club to get some benefit from him at the professional level.

We've already seen some cases of clubs with fewer restrictions benefiting from being able to offer more substantial wages. Wolfsburg recently convinced coveted left-back Ricardo Rodriguez to extend his contract, with German tabloid Bild claiming his wages were doubled from €2 million to €4 million per year. Without Volkswagen's millions, the Lower Saxony side could never have afforded to pay such a high wage, especially to a full-back. The club previously took a similar approach with Luiz Gustavo.

Opening the doors to foreign investment would turn football in Germany into something of a lottery, with clubs hoping they'll be picked by the next ultra-rich investor. And it could have negative implications on traditionally cherished aspects of league culture.

At the same time, the status quo is unacceptable even for Bayern. The Bundesliga has lost its relevance as a competition; for Bayern to win it is no longer regarded so much as an accomplishment as it is a meeting of expectations. Manuel Neuer and Franck Ribery's recognition in Ballon d'Or voting in the last two seasons was only diminished by the Bundesliga being "too easy" for Bayern to win, and few neutrals have been attracted to the German top flight since the winners became a foregone conclusion.

It's not ideal for Bundesliga clubs to "sell out" to investors, but if that is what is necessary to make the league competitive, exciting and attractive once more, it may be the only acceptable option.

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