UEFA today announced sweeping reforms that ensure clubs fiscal prudence and financial parity. Michel Platini after these resolutions were adopted unanimously:
“This approval today is the start of an important journey for European football’s club finances as we begin to put stability and economic common sense back into football. I thank all the stakeholders who have supported this along the way.”
Most of these measures are built around stopping rich owners from underwriting losses by “bailing out” the club with borrowed money. Since these are not frontloaded transfer or salary caps, UEFA has introduced ‘carrot and stick’ measures- strict auditing and financial transparency requirements which they hope will rein in bloated transfer fees and salaries.
Clubs who pass these financial litmus tests will be rewarded with participation in the lucrative Champions League. Those who do not pass muster, will be disbarred.
- Break-even requirement – clubs must not spend more than they generate over a period of time.
- No overdues payable during the season – towards other clubs, employees and/or social/tax authorities.
- Provision of future financial information – to ensure clubs can meet their future obligations.
UEFA wants to gradually wean the clubs away from owner underwritten debt. In hard numbers:
- Owners will be allowed to cover losses of up to a maximum of $55 million over an initial three-year period starting in 2012.
- In the three years from 2015, just $37 million in losses can be covered.
- The bailouts would only be allowed with “committed funds” of capital and not by borrowing.
- Clubs without a wealthy patron would be allowed $6.1 million in losses over three years.
- Clubs should aim to spend no more than 75 percent of revenue on player costs.
The writing is clear for clubs like Man City, Chelsea, Real Madrid, and even Barcelona. This year should see record setting amounts paid out in transfers as these clubs scramble to beat the deadline before the plug on unchecked spending is pulled.