UEFA Rules for Financial Fair Play

(MoneyWatch) 

Portsmouth football club's collapse, the global economic downturn and a growing sense that football club finances were unsustainable first prompted the UK's Premier League to get tough on club bosses. The most important of its reforms is the one that forces clubs to show the league their budgets in advance of the forthcoming season and demonstrate they have the means to service them.

Then in May, UEFA, European football's governing body, cut through the flannel and implemented a rule that is heartbreaking in its simplicity.

See Also:

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UEFA’s Rule

From 2012:

Clubs can subsidise losses of up to 45m euros, but only if equity

2016-2020:

Subsidised losses should be reduced to 30m euros

From 2012-13, clubs that wish to play in European competitions must break even, not spend more than they earn. The aim is to stop clubs across Europe spending beyond their means, which will require them to constrain players wages. All of clubs other costs — general staffing, stadium maintenance and operating expenses — have grown as football has boomed, but they are generally manageable and unlikely to be affected by the austerity.

UEFA’s most impressive achievement is simply in getting consensus for the regulation — it required agreement from the top professional clubs and their owners. According to UEFA president Michel Platini, Chelsea owner Roman Abramovich —who has underwritten the club to the tune of £726m — had told Platini he agreed with the initiative. Although other individual club owners and chief executives have yet to publicly comment, the Premier League has welcomed UEFA’s rules, while acknowledging that clubs face a challenge to comply.

The vast majority of what is being proposed is common sense, a Premier League spokesman said. We envisage a difficult period of adjustment for our member clubs who play or aspire to play in European competition.

According to Karl-Heinz Rumenigge, president of Bayern Munich, who’d pushed hard for the Europe-wide rule to mirror German practice, it will “set European club football on a path towards more responsible business practices,and thus a much more promising future.’

The initiative will be phased in, allowing owners to subsidise total losses of 45m euros from 2012-13 to 2015-16, if their money goes in as equity, not loans.

As of 2016 to 2020, subsidised losses must be reduced to 30m euros with UEFA expecting them to continue falling

The hope is that this will finally attack its two identified structural problems in European football: massive debts, and the reliance on the financial backing of owners, who can pull out and leave the club in crisis. According to Platini: “It is a question of ethics, a question of credibility — even a question of survival for our sport.”