Europe’s Soccer Clubs: The Continent’s Other Looming Debt Crisis

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Bogdan Maran / AP

Chelsea's David Luiz, John Terry, center, and Fernando Torres, right, try to score against Aston Villa, during their English Premier League soccer match at the Stamford Bridge stadium in London, Dec. 31, 2011.

Euro zone governments aren’t the only entities seriously needing to get their debt levels down these days. Information revealed this past week showed Europe’s leading soccer clubs are similarly spending their way into a dangerously deep hole, and must somehow find a way to reverse increasing losses before penalties against spendthrift teams are applied in 2014. According to a report issued Jan. 25 by soccer’s European authority, UEFA, Europe’s top clubs lost over $2 billion in 2010 alone—itself only the most recent surge in a rising tide of red ink.

The UEFA report stated 56% of Europe’s top pro soccer clubs lost money in the 2010 financial year for a staggering total of over $2 billion—a 30% jump from $1.56 billion the previous year. Though the game’s ever increasing popularity—and higher prices for tickets, merchandizing, and TV rights—meant total revenue rose in 2010 by 6.6% to $16.16 billion UEFA’s top tier teams, skyrocketing costs driven by escalating player salaries produced yet another negative bottom line. Combined debt in 2010 jumped to $18.7 billion. Little wonder, then, that UEFA officials revealed those dismal figures with the reminder that painful sanctions will be applied under “financial fair play” rules beginning in the 2014-2015 season for recklessly spending clubs.

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On the one hand, the live-within-your-means strictures aim to reduce the advantage big spending clubs have over more financially responsible ones—and halt what’s increasingly looking like the effort of profligate clubs to simply buy titles by assembling the best and most expensive players around. But in addition to seeking to level a playing field now tilted by money, UEFA also makes its fears clear that the pro sport itself is heading towards potential collapse under debt if more responsible business practices aren’t adopted—or imposed.

Among the punishments stipulated under the new regulations is the potential banning of wayward teams from UEFA’s two showcase (and big income-generating) tournaments, the Champions’ League and Europa Cup. Under the rules, any club posting collective losses of $58.5 million or more over a two year period will be subject to penalties limiting its spending and recruiting abilities—and possible exclusion from those two lucrative cup tournaments, which are broadcast to billions around the globe. The logic for taking aim high up the winning ladder seems clear. Though the UEFA audit reported rising losses across the entire body of over 650 elite clubs registered in 53 UEFA member states, the accumulation of red ink is thickest at the top, while profits are generally turned in by more modest outfits. Fully 75% of the richest and best clubs lose money; outlays on transfer fees and salaries among Europe’s top 10 teams were twice those of the next 10. And so it goes all the way down.

If the rules actually have the teeth threatened—and the independent monitoring body has the courage to take on Europe’s most affluent and powerful owners—the two-decade boom period for European pro soccer may be about to end. And with no exceptions this time. Though virtually all top-flight clubs have lived beyond their means for over a decade now, several leading teams have enjoyed the particular advantage of having deep-pocketed owners willing to wipe their indebted slates clean. Real Madrid, for example, has long relied on the Spanish crown to step in and assume the losses and debts created by assembling “Galactica” sides. Chelsea’s billionaire owner Romain Abramovich is similarly used to writing the kinds of checks that expunged the $65.1 million loss his team rang up last year. The Abu Dhabi owner of Manchester City demonstrated even greater largesse in 2011 when he wrote the club’s $164.5 million operating loss off. Now backed by a Qatari investor, Paris Saint-Germain has also started trying to buy its way (at a loss) into the big time by bringing to France new and expensive stars from more fashionable leagues.

All that would be over, however, under UEFA’s looming rules calling for all clubs to balance their books. At the end of the year, the clubs’ bottom line will be examined, not the outlook once new bank credits (or billionaire owners’ checks) have papered over what most would deem horrible business results. Meaning the days of the sugar daddy in European soccer may be coming to a close as a climate of austerity kicks in. Still, the debt-expunging handouts that may be coming to an end in the beautiful game would surely find takers elsewhere—starting with euro zone governments who themselves are looking for ways to lighten their mounting arrears. Perhaps E.U. leaders should forego summitry for some soccer practice.