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UEFA plots end to massive debts with finance plan

SoccerNews in UEFA Champions League 15 Sep 2009

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Conspicuous spending by mega-rich clubs could soon be a thing of the past after UEFA on Tuesday ratified a new initiative obliging European clubs not to spend beyond their means.

UEFA’s ‘Financial Fair Play’ concept, which was ratified by the its Executive Committee here on Tuesday, will prevent indebted clubs from competing in European cup competitions and is set to come into force in 2012.

At a time of global financial insecurity the European football market appeared an oasis of fiscal optimism this summer, with transfer records being broken at an unprecedented rate.

Real Madrid led the way as returning president Florentino Perez launched his latest project to lead the club back to the pinnacle of the European game after seeing them comprehensively put in the shade by rivals Barcelona last season.

In June they broke the world transfer record twice in the space of a week, bringing in Kaka for AC Milan for 65 million euros before landing Portuguese winger Cristiano Ronaldo from Manchester United for 94 million euros.

French striker Karim Benzema, Spanish midfielder Xabi Alonso and defenders Raul Albiol and Alvaro Arbeloa all followed as Real’s transformation into football’s answer to the Harlem Globetrotters gathered pace.

Real’s transfer activity has thrust Spain’s La Liga into the global spotlight but the English Premier League remains Europe’s top league in terms of TV revenue and worldwide appeal.

Leading the charge this summer were Manchester City, bank-rolled by owner Sheikh Mansour, who spent almost 120 million pounds (135 million euros) on new players in a bid to break into the cash cow that is the English top flight’s ‘Big Four’.

Chelsea, Liverpool and Manchester United – who make up the foursome alongside Arsenal – have all been taken over by foreign investors in recent years.

Together, the three clubs have amassed around 1 billion pounds (1.13 billion euros) of debt in a bid to remain competitive at the very highest level, but it is this kind of debt accumulation that European governing body UEFA now hopes to outlaw.

UEFA now wants European sides to spend only what they raise from football-related income such as tickets sales and television revenue.

A statement on the UEFA website read: “The main purpose of the Financial Fair Play concept is to improve the financial fairness in European competitions and the long-term stability of club football across the continent.

“In order to achieve this goal, a set of measures will be put in place including: the obligation for clubs whose turnover is over a certain threshold, over a period of time, to balance their books or break even, (ie clubs cannot repeatedly spend more than the generated revenues); to give guidance on salaries and transfer spending; to provide an indicator on the sustainability of the levels of debt; and the obligation for clubs to honour their commitments at all times.”

UEFA president Michel Platini has previously called for an end to “success on credit”, whereby clubs amass huge debts in a bid for short-term gain and become reliant on future income.

Platini announced last month that by the 2012-13 season, UEFA hopes to be able to examine club accounts for the previous two seasons.

From 2013-14, he added, sanctions could be imposed on clubs by an independent panel, ranging from fines to suspension from European competition.

UEFA announced on Tuesday that this panel would be chaired by former Belgian prime minister Jean-Luc Dehaene.

The Premier League pre-empted UEFA’s stance by introducing its own financial measures earlier this week, obliging their clubs to submit their accounts to independent scrutiny on a yearly basis.

“It is absolutely essential that these clubs are run as viable, going concerns,” said Premier League chief executive Richard Scudamore.

“We would far rather intervene than risk a club going into administration.” pgr/thw/jd

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SoccerNews

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