Play fair

Michel Platini calls it "one of the most important projects of my tenure." UEFA's all-new "Club Licensing and Financial Fair Play Regulations (FFP)" will start coming into effect in June, and the UEFA president says they will make European soccer "fairer and more moral."

"If a club doesn't fall in line and follow the same rules as everyone else then it will be time to face the music," Platini said as the finalized plans were presented in January. This June, FFP will start being phased in, though it won't come into force fully until July 2014.

Over the three-year interim period, clubs will be allowed to record maximum losses of €45 million ($64 million). After that, UEFA expects them to break even. It is, as Platini put it, "a simple but demanding rule: a club should not spend more than it earns."

A Herculean accounting task

That motto sums up UEFA's 85-page financial fair play handbook, but for many it also encapsulates the main problem with modern football, especially when it comes to the inequalities between the English Premier League and other less affluent European leagues.

In mid-May, the Guardian newspaper reported that the Premiership's 20 clubs collectively lost well over half a billion euros in the 2009-2010 financial year, even though they generated a record income of 2.4 billion euros.

On top of that, an impending UEFA report is expected to show that Premier League clubs owe a collective debt that tops that of all the other clubs in Europe's top divisions put together.

So It's hardly surprising that some German club chairmen are looking across the channel and openly doubting that Manchester City and Chelsea, especially, will be able to stick to the rules without some special accounting tricks.

Parsimonious Germans, splurging English

Bayern Munich CEO Karl-Heinz Rummenigge has been expressing concerns: "I do wonder about some clubs in England, Italy or Spain," he told the Welt am Sonntag newspaper last Sunday. "Are they ignoring it (over-spending) or are they just not taking this seriously?"

Rummenigge, a long-time critic of over-spending in football, is under no illusions that some clubs will find a way round these rules. "Since man is man, he is creative. We'll see if UEFA has the will to control and prevent this creativity," he warned.

The head of the German football league, Christian Seifert, echoed Rummenigge's concerns to the financial daily Handelsblatt. "I'm sure there will come a time when UEFA will have to deal with attempts to get round or to deceive them," he said.

It's for this reason that Rummenigge is putting pressure on UEFA to declare a clear and heavy punishment if the new rules are breached: in other words, he wants teams who over-spend to be excluded from European competition.

But whether it will come to that is another matter. Stefan Szymanski, a British economics professor at the City University in London, has his doubts. "It does seem quite hard to believe that the very big clubs will be significantly sanctioned," he told Deutsche Welle.

Bundesliga should dominate

Szymanski also thinks that FFP will do little to even out the fundamental imbalance in the game. "The issue is simply that the English Premier League generates vastly more income than the German league does. The financial fair play rules won't do anything about that," he said. "Even if they spend strictly within their football limits, then the English clubs will still dominate."

But Stefan Ludwig, director of financial services company Deloitte Germany, says the basic wealth gaps can be addressed by financial means. He says last year's Champions League final between Bayern Munich and Inter Milan offers a good example. Bayern were underdogs in the game because their squad boasted fewer stars.

"Even though Inter generated less income in that season than Bayern Munich, they spent more money on players," he told Deutsche Welle. "If FFP had existed then, the club's management would have had to work very differently, which would have had an effect on the squad."

Making Europe more German

But Szymanski has little sympathy with German complaints. He believes the problem lies in the way that German football has been set up. "When my rules don't work as well as your rules, then the answer is not to say 'well, let's have some more rules that make it fairer,' " he said. "The answer is if my rules don't work, I should change my rules."

Financial analysts agree that a lot of the new regulations have been adopted from the Bundesliga, though UEFA has extended and adapted them. But Szymanski argues that German clubs should free themselves of their soccer institutions and go commercial.

"Frankly the German league could easily be the dominant league in Europe if it were run commercially," he said. "Ultimately it's about spending power, and surely Germans have more spending power than the English. The problem is that the German clubs are not willing to spend and the institutions they have set up have prevented them."

Ludwig disagrees. "Commercialization has developed just as far in Germany as it has in other countries," he said. "The Bundesliga earns the largest sponsoring revenue of all the leagues."

Big clubs, big banks

But Szymanski does admit that limiting spending is in the clubs' collective interest. "The problem with football is the same as with banks. They consider themselves too big to fail," he said. "Big clubs will never, ever be shut down, because there will be such political pressure at the local, cultural level to bail them out. Obviously that affects the behaviour of those that run them."

Ultimately, it comes down to the question of what UEFA is trying to do: does Platini want to keep clubs financially stable or make the competitions fairer? FFP will certainly help struggling clubs remain financially stable, but it seems that UEFA can do little to stop super-rich clubs like Chelsea and Manchester City from spending what they like – partly because of European law.

It's true FFP stipulates that an owner can't bail out his club if it is running at a loss – in effect, this rule is meant to stop the likes of Chelsea owner Roman Abramovich and Manchester City owner Sheikh Mansour bin Zayed al Nahyan from simply pumping money into the clubs until they succeed.

But Szymanski argues there is really little UEFA can do. "If UEFA attempted to withdraw the licenses of either of these clubs and prevent them from playing in the Champions League, it could very well go to the European Court of Justice, and UEFA would be likely to lose," he said. "It's a fundamental principle of European law that if you own a business, you can put your money into it."

Szymanski's conclusion is withering: "If UEFA is saying that it doesn't want people like Abramovich and Mansour in football, it has to come out and say it. It can't hide behind regulations."

Author: Ben Knight

Editor: Susan Houlton