It was in September of 2009 that UEFA's executive committee approved a financial fair-play concept for the benefit of the game.
The objectives of this concept were to: introduce more rationality and discipline in club finances; decrease the rising pressure on salaries and transfer fees and limit the inflationary effect; encourage the clubs to spend within their revenues. encourage long term investment in youth sector and infrastructure; protect the long term viability of European club football; and ensure that clubs settle their liabilities on a timely basis.
These objectives reflect the popular opinion that UEFA has an obligation to look over the systemic environment of European club football, and more specifically the inflationary effect of clubs' spending on salaries and transfer fees.
Financial fair play was put into practice due to increasing reports of worsening financial losses amongst football clubs. The global economic situation has created difficulties for clubs all over Europe.
This could have an impact on the revenue that clubs make and these clubs will have increasing difficulty in financing their operations. In addition, the pursuit of success in football has caused clubs greater debt than they can afford which could eventually prove to endanger the long-term survival of football clubs as a whole.
Many clubs have already gone through liquidity shortfalls, which can, in turn, cause delayed payment of debt, be it to other clubs or even employees and tax authorities.
That is why UEFA aimed to introduce sensible and appropriate measures in order to achieve these goals. Clubs are therefore no longer allowed to repeatedly spend more than their generated revenues. Over a period of time, the clubs have an obligation to break even.
They will need to meet all transfer and employee payment commitments at all times. Higher-risk clubs will additionally need to provide budgets detailing their strategic plans.
These financial regulations will control the advantage of clubs with wealthy owners over other clubs who are run on a more sustainable business model and create a more level playing field.
The 2011/12 season is the first in which financial fair play rules will apply. The ultimate penalty would be an automatic disqualification from European competitions if any of the rules were to be broken. Other penalties originally involved fines, the withholding of prize money as well as transfer bans. In early 2012, UEFA decided not to proceed with transfer bans following legal advice.
On announcing this new legislation, UEFA president Michel Platini said to reporters: “Fifty per cent of clubs are losing money and this is an increasing trend. We needed to stop this downward spiral.
“They have spent more than they have earned in the past and haven't paid their debts. We don't want to kill or hurt the clubs; on the contrary, we want to help them in the market.
“The teams who play in our tournaments have unanimously agreed to our principles…living within your means is the basis of accounting but it hasn't been the basis of football for years now.
“The owners are asking for rules because they can't implement them themselves - many of them have had it with shoveling money into clubs and the more money you put into clubs, the harder it is to sell at a profit.”
Platini later said that the vast majority of football clubs agreed with these regulations and that an individual panel would have to be set up in order to ensure that clubs follow these regulations.
We can only hope that the forthcoming financial fair play plans by UEFA will help the crises many football clubs are in and then prevent any further downfalls. Football must not be dragged down with the economic crises Europe is facing today.
Write for GiveMeSport! Sign-up to the GMS Writing Academy here: https://bit.ly/12nAsNY
DISCLAIMER: This article has been written by a member of the GiveMeFootball Writing Academy and does not represent the views of GiveMeFootball.com or SportsNewMedia. The views and opinions expressed are solely that of the author credited at the top of this article. GiveMeFootball.com and SportsNewMedia do not take any responsibility for the content of its contributors.