Jan. 25 (Bloomberg) -- Top-level European soccer clubs’ losses widened by 36 percent to 1.6 billion euros ($2.1 billion) in the 2010 fiscal year, according to an audit of 665 teams by the sport’s regional governing body.
Sales rose 6.6 percent to 12.8 billion euros during the period and costs surged 1 billion euros to 14.4 billion euros, with 56 percent of clubs making a loss, Nyon, Switzerland-based UEFA told reporters today. The teams had debts of 8.4 billion euros, the group said.
The organization is trying to promote fiscal discipline among clubs with new rules that threaten sanctions, starting in 2014, should teams fail to rein in their losses, most of which are connected to the purchase and wages paid to players.
“It’s the last wakeup call that this red trend has to be inverted very, very quickly if we want to safeguard European” soccer, Gianni Infantino, UEFA’s general secretary, told reporters at UEFA’s headquarters today.
The losses led Ernesto Paolillo, the chief executive officer of Inter Milan, to describe it as a crisis that mirrors the causes of bank failures in 2008 and the current economic issues affecting the Eurozone.
“I can compare the situation of the football industry exactly to the situation of Italy, Spain and Greece’s balance sheet,” Paolillo, a former banker, said today. “The first move must be to cut costs and increase revenue. This is important.”
He said not taking action may lead to collapses like the one that saw investment bank Lehman Brothers Inc. file for bankruptcy.
Clubs spent 3.3 billion euros on players, with 2.3 billion euros still owed to selling teams. Employee costs had “a small decrease” to account for 64 percent of total revenue, the report showed.
More than half of teams “reported a weakening in their balance sheet, indicating a lot of club owners did not cover the losses,” the governing body said in the report. Infantino said 13 clubs currently playing the in the Champions League and Europa League would have failed the break-even tests required from the 2014 season, when sanctions will come into force.
“Financial fair play is going to happen,” he said.
UEFA published an 85-page book on the new rules. Still, the governing body hasn’t been able to confirm that sanctions are compatible with European Union law. Infantino said bans for the worst rule breakers remain an option.
Clubs that breach the rules could be prohibited from fielding new players, be deducted points or face limits on squad sizes in European competition, as well as fines and exclusion from the tournaments, UEFA has said.
Last week, Karl-Heinz Rummenigge, CEO of Bayern Munich and head of the European Club Association, a body representing about 200 top teams, said UEFA has had enough time to discuss what the penalties would be and it was time to make an announcement.
Infantino said he’d held talks with the European Union’s Competition Commissioner Joaquin Almunia.
“We ended with the common opinion that if financial fair play would’ve been applied in the European economy rather than football maybe the situation would’ve been different,” he said.
Alasdair Bell, UEFA’s senior lawyer, said the organization was willing to take the “risk” and defend itself in court if a major club challenged punishments for breaching the regulations.
“The system is not going to have much credibility if a big club that is in serious breach of the rules is not punished in an effective way,” he said. “For me the sanctions need to be effective enough that people come into compliance with the system otherwise clubs are going to become disillusioned rapidly.”
Infantino was joined in Nyon by Paolillo and Lyon president Jean-Michel Aulas, two of the biggest supporters of the need to impose fiscal discipline in the sport.
“These rules are not excluding new investors,” said Aulas. “But I believe new investors can come into market attracted by rules that mean there’s a stop to losses and debts. It’s a very good condition for an investor to come to market knowing he can’t lose more than a certain amount.”
To contact the reporter on this story: Tariq Panja in Nyon via the London newsroom at firstname.lastname@example.org.
To contact the editor responsible for this story: Christopher Elser at email@example.com.