The Sweeper: Is the End Nigh For Indebted European Clubs?

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I know.  How often will this headline keep popping up you ask yourself?  Yet as in the past few months, football news has been dominated this weekend with reports of the growing unsustainability of club debts in Europe in light of Michel Platini’s “Financial Fair Play” initiative, a ruling that would only permit clubs without loaded-on debt or budget-balancing cash injections from wealthy investors to compete in UEFA competitions like the Champions League.  With news of financial problems at various Premier League clubs emerging almost daily—this weekend’s latest horrors features Pompey possibly suing for withheld TV money, and fresh doubts over West Ham’s prospective new owners—several writers are sounding the alarm.

David Conn has written an excellent summary of the current financial state of affairs of the Premier League in the Observer today, and asks the obvious question: “How has the world’s richest league, with the most lucrative TV deal and some of the most expensive match tickets anywhere, whose clubs have become merchants of football and vigorous exploiters of their own ‘brands’, generated such financial carnage?”  Conn lays much of the blame at the feet of Richard Scudamore, whom he notes has earned millions of pounds from his “paymaster” club owners for maintaining an environment with little regulation of investor debts:

…Richard Scudamore, the Premier League’s chief executive, who was paid a £1.537m salary package in the year to 31 July 2009, including a bonus of £745,566 for negotiating the TV rights, defended the “responsible” approach of his paymasters.

“Our clubs are all heavily regulated but they’ve also got directors and owners who will assess the level of risk of their overall debt,” Scudamore said reassuringly. “This is at the top of clubs’ agendas and I think they are managing it responsibly.”

Meanwhile, while the Times’ Nick Harris cautions that Platini’s plans are far from being finalized, and if implemented, could lead to a breakaway league.  He also notes many European clubs would be affected by the ruling, listing several big name clubs in order of debt.  Whether Platini is able to step in or not, it is hard to argue that the unregulated, Wild West mentality of various Premier League investors can forever be continued without consequence.  With United’s and Liverpool’s seasons already arguably affected by debt-problems, Hull seriously overspending, and Portsmouth fighting a winding up order, the current laissez-faire European model doesn’t offer much in the way of long-term stability.

Worldwide Stories

  • Despite the doom-and-gloom, there are some feel-good investment stories to mention.  Every few months or so, it seems the papers are obliged to do a write-up on how Randy Lerner’s relationship with Aston Villa is an exception to the arrogant, outsider Yanks who are ruining English football.  Here’s the latest installment.
  • Jonathan Wilson recaps the past week’s events in the Africa Cup of Nations, a must-read ahead of the quarter-finals.
  • Several dissenting views on Rafa Benitez argue the Liverpool manager is not primarily to blame for the club’s recent form.
  • The Offside offers an intriguing alternative to video replays: good old fashioned uncertainty.
  • reminds us that the clash between fly-by-night investors and long-standing clubs with rich histories isn’t restricted to the English top flight.

Richard Whittall writes A More Splendid Life.

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