UEFA Financial Fair Play Regulations

The UEFA Financial Fair Play Regulations, first agreed in principle in September 2009 by the Financial Control Panel of football’s governing body in Europe (Union of European Football Associations UEFA), were brought in to prevent professional football clubs spending more than they earn in the pursuit of success and in so doing getting into financial problems which might threaten their long term survival.

Introduced amid concern at the heavy spending of a number of professional clubs across Europe, it is hoped that the regulations will eventually lead to a more ‘level playing field’ by preventing clubs with very wealthy owners who make substantial cash gifts to their club from gaining an unfair advantage over other clubs who may be run on a more sustainable business model, and in so doing encourage lower levels of spending. The FFP Regulations provide for sanctions to be taken against clubs who do not spend within a set budgetary framework over several seasons.

The 2011–12 football season is the first during which the regulations apply; The ultimate penalty is disqualification from European competitions. Other possible penalties originally included fines, the withholding of prize money, and transfer bans. As of early 2012, however, UEFA has had to shelve plans to ban player transfers following legal advice, and it remains to be seen if other threatened sanctions will be taken in practice.

On announcing the new legislation, UEFA President Michel Platini said,

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 shovelling money into clubs and the more money you put into clubs, the harder it is to sell at a profit.

Background

A UEFA review in 2009 showed that more than half of 655 European clubs made a loss over the previous year, and although a small proportion were able to sustain heavy losses year-on-year as a result of the generosity of their owners, (see wealthy benefactors) at least 20% of clubs surveyed were believed to be in actual financial peril. The reasons for this are well summarised in the 2010–12 House of Commons report on Football Governance:

Club owners are generally over optimistic about their management abilities and vision for a club. With ample academic evidence that there is a clear correlation between squad wages and points won - something which is obvious to owners - there is a natural tendency to borrow in the pursuit of success, although not all teams can be successful. There are many examples of clubs where the directors (true fans) have “chased the dream” - gambling short-term investment (or borrowing) in the hope of long-term success. The pressure on the directors of a club to invest, to sign a star player…is often immense from ordinary supporters.

Even among Europe's elite sides, continued excessive spending has often been justified by club executives as being "necessary to keep the club competitive". As Christian Müller, CFO of the Bundesliga told the European Commission: “...we learn by experience all over the world [that] most club executives tend to operate riskily, tend to overestimate their chances in the Championship. This may result in disproportionate spending relative to the income some clubs generate.... club executives have somehow to be protected from themselves.”

The vast majority of the overall European football debt is owed by only three of the biggest leagues: the English Premiership, the Italian Serie A and the Spanish Primera División, commonly known as La Liga.

The English, Italian & Spanish leagues

A report by the accountants Deloitte indicated that total debt among the 20 English Premiership clubs for the year 2008-09 was around £3.1 billion.

At the time of the introduction FFP, several Premiershipship clubs were known to be spending considerably above their income. For example, between 2005 and 2010 West Ham United recorded an aggregate net loss of £90.2 million , with equity of £13.063 million on 31 May 2010 following a re-capitalization , while Everton, whose manager David Moyes had long received praise for his continued ability to keep the club among the top Premiership sides despite an extremely tight transfer budget, had a negative equity (in group accounts) of £29.774 million on 31 May 2010, making a net loss of £3.093 million in consolidated accounts.

Worse of all though were the finances of Portsmouth, who had a shortfall of £59,458,603 to the creditor in February 2010 (after deducting the book value of the asset) Having invested heavily on players over previous seasons, (the previous year's net loss was covered by Alexandre Gaydamak), Portsmouth won the 2009–10 FA Cup in 2010, but as the season wore on the financial situation deteriorated, leaving players unpaid and the club with an outstanding bill for income tax which in turn led to a winding-up petition from HM Inland Revenue. There then followed administration to avoid the club being liquidated, a nine-point deduction from the Premier League, and finally relegation into the lower division. A similar train of events had affected another English club, Leeds United, some years previously.

The problem of debt was not confined to the top division, with a number of clubs in the second tier of English football, the Football League Championship seemingly gambling their futures in an effort to gain promotion into the Premiership. The 2010 - 2012 parliamentary report into English football noted that; “much of the overspending (by non Premier league clubs)is as a result of the desire to get into the ‘promised land’ of the Premier League or indeed to simply stay there... the prevailing reasoning amongst Football League sides seems to be that excessive levels of spending can be sustained for a few years within which time promotion must be achieved. After that, Premier League revenues can be used to pay off all the debts accrued”

In the Italian Serie A most clubs also reported a net loss over the previous season: A.C. Milan (group) €69.751 million on 31 December 2010; Genoa C.F.C. €16,964,706 on 31 December 2010; ACF Fiorentina €9,604,353 on 31 December 2010; Bologna F.C. 1909 €4,166,419 on 30 June 2011; Chievo €527,661 on 30 June 2011, etc. Only a few Italian clubs made a net profit, these included Udinese Calcio, Calcio Catania, S.S.C. Napoli (€4,197,829 on 30 June 2011) and S.S. Lazio (€9,982,408 on the group account on 30 June 2011).

Some of the Italian clubs had been losing money for a number of years; for example Internazionale have accumulated losses of around €1.3 billion over the last 16 years, while on 20 May 2005 Italy’s oldest club, Lazio, agreed a 23-year repayment plan to pay back a €140 million overdue tax bill. The club recovered however, showing a net asset/equity of €10,500,666 in its consolidated accounts on 30 June 2011, while net financial debt of the group (Template:Lang-it) was €9.01 million. Its city rival A.S. Roma SpA, from its ultimate holding company Italpetroli, intermediate holding company "Roma 2000" (the holding company or the head of Roma larger group of companies, holding company of "ASR Real Estate S.r.l." and "Brand Management S.r.l.") to AS Roma SpA (or AS Roma [smaller] group), owed considerable money to banks, including UniCredit. On 30 June 2010, AS Roma SpA had a negative equity (total liability greater than total asset) of €13.2 million on the consolidated balance sheet, which ultimately led to the group ("Roma 2000") being sold to American billionaire Thomas R. DiBenedetto. Before the formal handover on 30 June 2011, the club had a net financial debt of €53.831 million, with a negative equity of €43.984 million.

Despite the most recent report showing 8% growth in the Spanish La Liga’s revenues, the highest of any European league, the overwhelming majority of the extra money went to the two dominant clubs, Real Madrid and Barcelona, primarily due to their ability to negotiate separate TV deals. During the summer of 2009, Real Madrid paid a world record transfer fee of £80 million for Cristiano Ronaldo. Despite being the world’s second richest club according to the Forbes' List, heavy spending on two other players, Kaká, and Karim Benzema with their associated high wages trebled Real’s net financial debt from €130M on 30 June 2008 to €326.7M on 30 June 2009, as the signing Albiol, Benzema, Kaká, Ronaldo and some minor players to 2009–10 squad were included in the 2008–09 financial year. Madrid signed one more big name, Xabi Alonso in August 2009, made the net financial debt only dropped from €326.7 million to €244.6 million on 30 June 2010, still higher than previous 8 seasons (2000-2008). However, the net asset/equity was increased from €195.9M to €219.7M. Their main rivals Barcelona also continued to spend heavily on transfers and players wages, although in recent years, the level had been slightly reduced. On 30 June 2009 Barcelona's net asset/equity was just €20.844 million.

Total debt in La Liga was estimated at £2.5 billion, leaving many of the owners, as so often in the past, having to put more of their own money into the club. In the summer of 2010, Villarreal failed to pay their players because the ceramics industry from which their owner, Fernando Roig made his money was hit hard by the European credit crisis. At the end of the year, Deportivo de La Coruña were more than €120 million in debt, Atlético Madrid owed more than €300 million, while the total for Valencia at one point in 2009 was reported to be as high as €547m. In 2007, during a property boom, Valencia's management decided to build a new 70,000 capacity stadium, despite doubts that it could attract enough fans to regularly fill it. Construction of the 'New Mestalla' was to be funded by the sale of the existing ground, however two years into the project work ground to a halt when following the Spanish property crash the club could not find a buyer. Despite an impressive display on the field, Valencia was forced to temporarily halt work on a new stadium and delay players wages when its bank Bancaja denied it more credit, forcing management to sell some of their best players, including David Silva and David Villa.

In the lower Spanish leagues, at least six clubs, including second-tier sides Real Sociedad, Celta de Vigo, and Levante were in administration with more threatened as the recession worsened. In July 2008, the Spanish Government revealed that the clubs had a combined debt of £507 million to the tax authorities alone, with substantial amounts owed to a number of other state bodies, such as the social security system.

The French and German leagues

For a number of years, the clubs in the two other big European leagues, the French Ligue 1 and the German Bundesliga, have been subject to regulations not unlike the FFP rules.

In France, The Direction Nationale du Contrôle de Gestion (DNCG) is responsible for administering, monitoring, and overseeing the accounts of all professional clubs to ensure that owners are being financially prudent. Sanctions for non-compliance include transfer embargoes, reduced playing squads, demotion, or even expulsion from the league. Despite lower incomes, French clubs do not carry the enormous multi-million euro debt of the English, Italian and Spanish leagues. A number of French clubs have produced small profits over a number of years, concentrating on developing young players in modern academies who then generate good profits when sold on to clubs in the Big Three leagues. For example, in the four years up to 2009 player trading by Lille, one of the leading clubs exceeded €164 million in profit.

OL Group, the holding company of the same name (Olympique Lyonnais), had a net profit of €5.1 million in 2008–09 season.

At the end of each season, clubs in the Bundesliga must apply to the German Football Federation (DFB) for a licence to participate again the following year; only when the DFB, who have access to all transfer documents and accounts, are satisfied that there is no threat of insolvency do they give approval. The DFB have a system of fines and points deductions for clubs who flout rules and those who go into the red can only buy a player after selling one for at least the same amount. In addition, no individual is allowed to own more than 49 percent of any Bundesliga club. Despite the good economic governance in the German league, there have still been some instances of clubs getting into difficulties. In 2004, Borussia Dortmund, the first German club to win a European trophy, reported a debt of €118.8 million (£83 million). Having won the Champions League in 1997 and a number of Bundesliga titles, Dortmund had gambled to maintain their success with an expensive group of largely foreign players but failed, narrowly escaping liquidation in 2006. In subsequent years, the club went through extensive restructuring to return to financial health, largely with young home-grown players. In 2004 Hertha BSC reported debts of £24.7 million and were able to continue in the Bundesliga only after proving they had long term credit with their bank.

The leading German club FC Bayern Munich made a net profit of just €2.5 million in 2008–09 season (group accounts, while Schalke 04 made a net loss of €30.4 million in 2009 financial year. Borussia Dortmund GmbH & Co. KGaA, made a net loss of just €2.9 million in 2008–09 season.

Other leagues

Other European leagues include the Portuguese Primeira Liga, the Dutch Eredivisie and the Scottish Premier League (SPL). Mainly as a result of their lower populations and smaller economies, these and other leagues such as the Belgian, Danish and Scandinavian leagues generate less revenue than those of the bigger nations and there are currently no clubs in the Deloitte Top 20 from outside the big five leagues, although these are home to a number of extremely well run and successful clubs.

Despite earning only 1/6th of Real Madrid’s revenue for example, Portuguese club FC Porto regularly reach the last 16 of the Champions League and have been European champions twice - in 1986–87 and as recently as 2003 – 04 - whereas other much wealthier clubs e.g. Arsenal and Chelsea have never won the competition. Porto make use of third party deals and an extremely effective scouting network, particularly in South America to buy promising young players to develop and play in the first team for a few years before selling them on for a big profit. Since 2004 Porto has covered its large operating losses with a €190 million net profit in player sales. Another big Portuguese club, S.L. Benfica also regularly competes at the highest level, being crowned European champions twice and being beaten finalists another five times.

The three main Dutch clubs, Ajax, PSV Eindhoven and Feyenoord have each been crowned European champions at least once, however in recent years their dominance has been challenged by the emergence of other clubs such as FC Twente, meaning they can no longer always rely on annual infusions of Champions League cash. As in other countries, the Global Recession greatly diminished sponsorship and TV income in the Netherlands, turning an Eredivisie profit of €64m in 2007/08 into a €90m loss for 2009/10. PSV Eindhoven recorded a €17.5 million loss as their annual revenue dropped back 40% from €85 million to €50 million, while major rival Ajax - the only Dutch club listed on the stock exchange - lost €22.8 million. After enjoying 11 consecutive years of CL qualification and reaching the CL semi-final in 2005, PSV found its regular profits turning into losses and began selling top players, including Heurelho Gomes (Tottenham Hotspur), Mark van Bommel (Barcelona), Park Ji-Sung (Manchester United), Johann Vogel (Milan), Alex (Chelsea), and Jan Vennegoor of Hesselink (Celtic). Able to count only on the much lower revenues of the Europa League (less than €4 in 2010), the club took on a €10m loan from its long-standing benefactor, the electronic giant Phillips and in April 2012 was forced to sell its ground and training complex to the local council for €49 million, leasing it back for €2.3 million per year. A leading councillor said that the move was necessary because of ‘the idiocy of big money and the game played between millionaires and football agents’

Recognising the unique social and cultural important of its clubs, Dutch local authorities invested over €300 million in football between 2006 and 2011, mainly through indirect subsidies and loans to clubs such as FC Utrecht, FC Groningen, FC Twente, Vitesse Arnhem and ADO Den Haag, though it is possible that such aid may fall foul of EU rules which govern the use of unfair subsidies.

A 2011 report from accountants PriceWaterhouseCoopers expressed deep concern at the fragile financial state of Scottish football. Despite a modest profit in five of the previous six seasons, net indebtedness of SPL clubs had grown over the previous year to £109m, with half of clubs reporting a worsening position and only two clubs, Hamilton Academical and St. Johnstone debt free. Despite providing the first British team (Celtic in 1967) to become European champions, since the advent of pay-per-view TV Scottish football had failed to keep up with its English counterpart; in stark contrast to the Premier League's vast TV earnings, following the collapse of the Irish satellite broadcaster Setanta in June 2009 the joint Sky-ESPN TV rights to be shared among all SPL clubs now amounted to only £13m per year, a figure little changed from the £12m it had received under the Sky deal as long ago as 1998.

Following the global downturn, job insecurity and rising unemployment meant that a number of Scottish fans did not renew season tickets, leading to a 10% (or 100,000) fall in attendances over one year. The entire turnover of SPL champions Glasgow Rangers for the 2008 09 season dropped 38% to only £39.7m, a tiny fraction that of the English champions Manchester United’s earnings of €327m. As with other leagues, participation in the UEFA Champions League continued to make the crucial difference between profit and loss for the two ‘Old Firm’ clubs, however because of mediocre performances in recent years the SPL champions no longer qualify automatically for the CL group stages and are now largely confined to the much less lucrative Europa League.

Leveraged buyouts

There was also concern at the heavy debt being loaded onto some clubs as a result of new owners borrowing heavily to acquire the club and then using future earnings to pay the interest, a practice known as a leveraged buyout. The world’s richest club, Manchester United, was bought in this way by the Glazer family in 2005 after which the club, previously very profitable, remains several hundred millions of pounds in debt. (Manchester United FC Limited was almost debt free, but its ultimate holding company "Red Football Shareholder Limited" had a negative equity of £64.866 million in its consolidated balance sheet on 30 June 2010.)

Liverpool found itself in a similar position after being purchased by Americans Tom Hicks and George Gillett in February 2007. Although subjected to less leveraged debt than Manchester United, by 31 July 2010 the club was suffering a negative equity of £5.896 million leaving it tottering on the verge of bankruptcy, and had to be put up for sale. Its holding company, KOP Football Limited - the entity which carried the debt generated from the leveraged takeover - had a negative equity of £111.88 million (in the separate balance sheet, consolidated balance sheet not prepared). However Hicks and Gillett placed what was widely believed to be an unrealistic value on the club in the hope of making a vast profit, for which they were severely criticised in the House of Commons as "asset strippers... draining the club with their greed." Eventually Liverpool was bought by a new American consortium, however because leveraged buyouts are permitted under normal stock market rules, they will not be addressed by the FFP rules.

Wealthy benefactors

A number of clubs across Europe are able to spend substantially more than they earn as a result of the benevolence of their owners who make substantial financial gifts to the club, either by paying off existing debt, providing direct injections of cash, issuing extra shares, or giving loans which are later written off. This adversely affects the market by creating wage and transfer inflation as well encouraging other clubs to spend more than they can afford in an effort to remain competitive. For example, Internazionale's enormous losses since the mid 1990s have been largely underwritten by their president, energy company owner Massimo Moratti. Its archrival, A.C. Milan was also financially supported by Silvio Berlusconi (over €120 million between 2007 and 2010, prior to 2006 unknown, 2011 result not yet released) The Della Valle brothers also contributed €84.7 million to ACF Fiorentina from 2006 to 2009 (prior to 2005 unknown). Juventus had re-capitalized two times in recent years, by about €104.8 million after the 2006 Italian football scandal and in 2011 by €120 million. In the English Premier League, Chelsea's massive transfer spending since 2003 has been paid for by their owner, the Russian oil and gas billionaire Roman Abramovich, while Manchester City is owned by one of the world's richest men, Sheikh Mansour bin Zayed bin Sultan Al Nahyan. Including the actual purchase of the club in 2008 and spending to improve facilities, Sheikh Mansour’s expenditure exceeded £1 billion, following which the club won the 2011 FA Cup, their first trophy since 1976, and finished third in the Premier League, earning them a place in the Champions League

Arsenal manager Arsène Wenger, a major proponent of the FFP legislation, has referred to "transparent owner equity investment" as "financial doping."

Referring to the intention to reduce the plutocratic influence of the "Sugar Daddies," UEFA President Platini said, "If you buy a house, you have a debt but that doesn't mean someone is going to stop you from working. If you depend only on a rich benefactor however, then the financial model is too volatile." Platini went on to say that the measures were backed by the majority of football club owners, and that an independent panel would be set up to judge whether clubs had broken the rules.

Delay in implementing FFP Rules

Despite broad approval across Europe, in early 2010, the European Club Association succeeded in delaying the full introduction of the FFP Regulations to give clubs more time to adjust. The original timescale was lengthened, with a phased implementation over five years meaning that the full rules will apply in 2015 instead of 2012. The clubs also rejected a proposal by UEFA that the new rule should only apply to clubs with a turnover of more than €50 million, agreeing that all clubs should be treated the same. Also on the agenda was a proposal to limit squads to 25 players with unlimited under-21 players per team at national and European level, as well as plans to reduce fees paid to agents. Clubs also agreed that they will not be able to owe each other money, nor will they be allowed to compete in Europe if salaries have not been paid to players or non-playing staff.

Despite the delay, ECA chairman Karl-Heinz Rummenigge, representing Bayern Munich, called the new rules "a magnificent achievement," and pointed out that 93 clubs from 53 countries who attended the ECA's General Assembly in Manchester agreed with the proposals. He stated, "After only two years of existence, the European Club Association has managed, together with UEFA, to set measures that will shape the future of European club football into a more responsible business and ultimately a more sustainable one."

Manchester United Chief Executive David Gill, also a member of the ECA board, said that his club would meet the new rules, despite their reported debts of £716.5 million. He said, "We have seen what the proposals are and we would meet the financial break even rules. We as Manchester United have always been run professionally and will continue to be run professionally."

Summary of current FFP Regulations

Football clubs wishing to take part in the UEFA Champions League or UEFA Europa League must balance their football-related expenditure over a three-year period up to the 2014–15 season.

The 2011–12 season is the first season which counts towards the 2014–15 assessment. Clubs, however, will be allowed to make a loss of €45 million (£39.4 million) over the three years, falling to €30 million from 2015–16. The first season that UEFA will begin actively monitoring the financial situation of individual clubs is 2013–14, but this will take into account losses made in the two preceding years (2011–12 and 2012–13).

From 2013-14 UEFA will be able to ban clubs from playing in European competitions the following season if the rules have not been met but it is not until 2018 that clubs will be expected to bring their annual losses below £8.8 million (based on 2010 exchange rates)

Only actual "football-related expenditure" — a club’s outgoings in transfers and wages — will be counted over income from gate receipts, TV revenue, advertising, merchandising, sales of players and prize money is included in the assessment. Any money spent on infrastructure, training facilities or youth development will not be included. The full regulations are available to download as a PDF from UEFA official portal UEFA.com.

Criticism of FFP

In the wake of the introduction of FFP, a number of commentators pointed to what they viewed as negative aspects of the new legislation. For example, it was thought unlikely that under the new system bigger clubs would grow even stronger and that smaller clubs would ever again be able to challenge the "established order" by winning trophies with short-term heavy spending on players in an attempt to raise their profile, support and income, ultimately turning themselves into a more self-sustaining and successful concern. There were also big implications for 'selling' clubs who might no longer be able to count on making good their yearly operating losses by regularly selling players to the bigger leagues.

Other commentators pointed to possible loopholes in the legislation itself; for example, up until the 2013–14 and 2014–15 season, clubs will be allowed to exclude from the FFP calculation the wages of players signed before June 2010 as long as they can show an improved trend in their accounts. There is also the potential for legal action to overturn the legislation and for larger clubs to artificially raise their income from massive sponsorship deals or stadium naming rights via companies with a vested interest in the club’s success, or from the sales of "overseas rights" to consortiums without clearly identified investors.

In addition, there remains the issue of widely differing tax rates and social security costs which the European leagues are subject to, meaning that some clubs have to pay a player much higher gross wages in order for him to be left with the same net salary as if he belonged to a club in another country. For example, if a player at an English club is to be left with a €100,000 a week wage after tax, he must be paid €200,000 gross, as opposed to €130,000 at a Spanish club.

One area of concern for English clubs is the practice of third-party ownership. Under this model, companies or wealthy individuals buy a percentage of a young player in the hope that if his value increases in the future they will make a profit based on their percentage. The advantage for clubs is that they can make big savings from not having to pay the full transfer value of a player and can also make other financial gains, that is, from selling on a player’s image rights. Following the problems caused by the sale of Carlos Tévez and Javier Mascherano to West Ham United in 2006, third party ownership was banned in the Premiership, although it is widely used in South America and Europe and is permissible under FFP. Following the introduction of FFP, the Premiership unsuccessfully lobbied UEFA to review the situation to avoid English clubs being disadvantaged, and in October 2011, the leading sports lawyer Jean-Louis Dupont told the BBC that the Premier League's third-party ownership rules were not legitimate and that a legal challenge to overturn them would have a "very, very good chance of succeeding."

Another very big issue for English clubs is the substantial payments made to the lower leagues in the football "pyramid" and to other charities out of their joint Sky TV deal. In 2009 /2010, Premiership clubs paid a total of £167.2 million to various causes, including £62.2 million to recently relegated clubs in "parachute payments;" £56.4 million across the Football League in "solidarity payments;" £17.3 million to the Professional Footballers' Association,;£7.8 million domestically and £3 million internationally to the Creating Chances Trust ( a charity for children leaving care); £12 million to other charities such as the Football Foundation, which provides funding for grass roots sport; £2.9 million to Professional Game Match Officials (referees and assistant referees); £2 million to the National Conference (currently known as the Blue Square Bet Premier); and £500,000 to the League Managers Association

These payments cannot be discounted from FFP. The German, Italian and Spanish leagues are not run along this model, with only France’s Lique 1 among the big European leagues having a similar system of solidarity payments to outside interests. The amounts paid by Premiership clubs, around £8.36 million per club or 14% of turnover could make a big difference to a smaller club in meeting FFP, yet could actually be stopped at any time by a 14-6 majority vote of the 20 club chairmen, and as of March 2012, the Premiership continues to lobby UEFA to request that these payments can be offset against the FFP calculations

2010–11 season

Transfer spending across Europe’s top five leagues during the 2010 summer transfer window was nearly 40 percent down on the summer of 2009. This was partly due to the 2010 World Cup, meaning players were more concerned with the success of their country in the tournament than moving clubs. The drop, however, was seen more as a result of the worsening global financial situation than the impending FFP. Total spending in the English Premier League was significantly down on the previous season at £395 million, although all of the traditional big English clubs spent more the £50 million on players.

In Spain, Barcelona's finances up to 30 June 2010 revealed that the club’s shareholder equity was dropped to negative €59.109 million, from a positive of €20.844 million, despite awareness of the FFP rules. Around the same time, however, Real Madrid President Florentino Pérez told the club's general assembly that the net debt was reduced to €244.6 million by 30 June 2010 as a result of an increase in revenue over the previous season, while the net asset/equity was slightly increased to €219.7 million.

In Italy, where for some time there had been concern at the slow growth in football income and the lack of competitiveness among clubs - partly due to the inequality in TV income - pressure by a number of clubs finally led to the three biggest, Internazionale, Milan, and Juventus agreeing to end the long-standing system whereby clubs negotiated their own TV rights. During the 2009/10 season, each had earned at least €100 million from major broadcaster Mediaset, and the introduction of the "collective sale" model of distributing TV income immediately strengthened the smaller clubs by up to €10 million each more per season, leaving the big clubs much worse off; in the case of Juventus, by around €43 million per year. But the change, which left the Spanish league as the only major league where clubs still negotiated separate deals, led to a much more entertaining and competitive season with a number of clubs being in with a chance of winning the Scudetto. Despite the effect the change had by reducing the spending power of his own club, Inter President Massimo Moratti indicated that he was actually looking forward to the changes, saying, "Some thought that FFP was against owners like me, but I say that at last it means that I can stop putting money into football every day. Inter are so expensive that I wouldn’t recommend it to anyone. I hope that FFP allows us to experience football in a different way."

January transfer window

In England, it was during the January transfer window that the most surprising business was done. Chelsea spent a reported £50 million on Fernando Torres and €25 million on David Luiz from Liverpool and Benfica, respectively.

Despite Chelsea FC's intermediate holding company "Chelsea FC plc" making a sight improvement in its accounts with a net loss of £67.7 million for the 2010–11 season, the effect of the increase in intangible assets led to a higher cost in the future. As transfer fee was considered as a purchase of a capital, the real effect of transfer fee was the amortization of the transfer fee, which is proportionally to the contract length. For example, Torres's £50 million transfer fee had to be amortized by about £9 million a season, which in the 2010–11 season amounted to only £4.5 million (due to half season). The club may lower the expense of amortization by selling players and extending the player contract.

Chelsea's transfer spending that season was the club’s biggest outlay since 2004 when they made losses of £87.8 million at the start of an eight-year period during which they won a number of trophies. Arsène Wenger, whose club Arsenal have been cited as an example of good financial governance by UEFA, questioned Chelsea’s behaviour after the signings, saying "Chelsea supported the financial fair play. In the morning they announce a £70 million loss, in the afternoon they buy £75 million worth of players. Where's the logic in that?"

In Italy, Milan Vice-President Adriano Galliani criticised English teams for their transfer spending in the wake of the big money moves for Torres and the £35 million spent by Liverpool on Andy Carroll as Torres' replacement; "Everyone's talking about balancing the books, but then they spend like crazy people, Chelsea strengthened in an amazing way spending €80 million, I just don't know where financial sense will end up."

In response, Chelsea chief executive Ron Gourlay insisted that the club were in "a strong position" to meet UEFA's initiatives and were on course to halve their losses during the following financial year, having reduced their player’s bonus scheme, negotiated new sponsorship deals, raised ticket prices and were able to count on additional TV revenue from higher UEFA Champions League and SKY television rights.

Following news of Manchester City's interim financial results showing another huge deficit, Michel Platini said he had been given personal assurances from club management that they would abide by the new rules. UEFA’s Head of Licensing Andrea Traverso also stated, "We are in talks with the club, they are aware of the rules and they probably have a strategy to raise their income."

Despite Chelsea and Manchester City’s losses, Premier League Chief Executive Richard Scudamore said that he did not expect UEFA’s rules to lead to any English club being banned from European competition. He stated; "I don't see any circumstances where any of our clubs could get near to exclusion.... UEFA is too sensible, and it's not in its interests to do so. It's more about taking the steam out of the system and acting as a speed bump rather than about barring clubs."

UEFA reminder

In all, English clubs spent £225 million during the January 2011 transfer window, prompting UEFA to issue a reminder that the activity counted towards the 2012 to 2015 period over which they were only allowed to lose £39 million in total, and that it would affect the amount they could spend in later years. A statement said,

UEFA is aware of the recent transfer activity across Europe and is confident that clubs are increasingly aware of the nature of its financial fair play regulations which require them to balance their books. It must be noted, however, that the financial fair play rules do not prevent clubs from spending money on transfers themselves but rather require them to balance their books at the end of the season. It is therefore difficult to comment on any individual situation without knowing the long-term strategy of each club. The clubs know the rules and also know that UEFA is fully committed to implementing them with rigour.

Wider acceptance of FFP

In June 2011, the English Football League announced that clubs in the divisions lower than the Premiership had also agreed in principle to adopt the FFP Regulations at their annual meeting. Debt in the lower leagues stood at around £700 million, of which 80 percent applied to the second tier of English football, The Championship. FA chairman David Bernstein described the Football League's announcement as "very encouraging."

Michel Platini also commented; "We are very happy to see that Football League clubs, under the umbrella of the Football Association, are again taking the initiative on good governance issues by introducing Financial Fair Play,"

2011–12 season

During the summer, Arsenal reluctantly sold two players, Gaël Clichy and Samir Nasri, to Manchester City to avoid losing them for nothing the following year when their contracts ended. Both players refused to sign new contracts, preferring to go to Manchester City where they could command considerably higher wages. Following the publication of Manchester City’s end of season financial results which showed Premier League record losses of £197 million, with players wages of £174 million, £21 million more than turnover (Chelsea's previous record in 2005 was £141 million), Arsène Wenger questioned whether UEFA would go through with their threat to take action against clubs who broke the rules, believing that Europe’s wealthy clubs would use legal means to fight any attempt to ban them from European competition or from buying players. Wenger said,

We live in a world where any decision made is challenged. Europe (the European Union legal system) has created that and we see how far Europe has gone. The authority of the legal affairs is challengeable everywhere. UEFA want to create a situation where clubs with deficits cannot play in the Champions League but I question whether they will be able to force it through. Will they have the legal power to force that through today? I question that because you have as well Paris Saint-Germain and Málaga [other high spending clubs] in other countries. Once they represent a force together, it will be difficult to fight against.

At the time, the Swiss club Sion were fighting a UEFA decision to ban them from the Europa League for fielding ineligible players. Supporting Sion, Karl-Heinz Rummenigge, the ECA chairman, who is highly critical of English clubs’ spending stated: "FIFA and UEFA need the clubs for a World Cup or European Championship but the clubs don't need them."

Manchester City naming rights

In July 2011, Manchester City announced that the City of Manchester Stadium was to be renamed the Etihad Stadium after signing a ten-year deal with their existing shirt sponsor, the Abu Dhabi-based airline Etihad Airways. A number of English clubs had already negotiated naming rights for their grounds, including Arsenal (Emirates Stadium), Bolton Wanderers (Reebok Stadium), Stoke City (Britannia Stadium), Swansea City (Liberty Stadium) and Wigan Athletic (DW Stadium).

The deal, worth a reported £400 million over ten years, was reckoned to be the largest ever sponsorship in the world in any sport, and questions were immediately asked about its validity because Etihad Airways is owned by the government of Abu Dhabi, which is ruled by Sheikh Khalifa bin Zayed Al Nahyan, the half-brother of Manchester City owner Sheikh Mansour.

A Manchester City official said that the reported figure was not accurate (it is now generally believed to be around £340m over 10 years) but he agreed that the current level of spending was not sustainable in the long run. He also pointed out that the sponsorship deal was not just for the football stadium but for the whole 210 acre campus being developed around the ground. When complete, this will comprise an expanded football academy and training ground, sports science centre, office and retail space and a 7,000-seat stadium for youth games. As infrastructure, the cost of building The Etihad Campus does not count towards the FFP financial calculation because it is not considered to be football-related, although any income generated will, and therefore will greatly assist Manchester City in meeting the UEFA requirements.

In August 2011, UEFA confirmed their intention to examine the deal to ensure it was not an attempt to unfairly circumvent the FFP regulations. The head of UEFA’s Financial Control Panel, Jean-Luc Dehaene, said they would benchmark all deals to make sure they represented fair value. He said,

If we see clubs that are looking for loopholes we will act. It is not enough to say 'we've got a sponsorship contract and that's OK' if the contract is out of line. You know where the problems are and you know you will have to confirm them. But on the other hand they are all members of the ECA (European Club Association) and if they don't follow the rules they won't have the support of the other clubs.

Chelsea stadium development

Chelsea, meanwhile, were looking at ways to increase the capacity of their Stamford Bridge site in order to raise match day income to help them meet the FFP regulations. The total capacity of 42,000 is relatively small for a big Premiership club when compared to Arsenal’s 60,000, Manchester United’s 76,000 and Real Madrid's 86,000 Because Stamford Bridge site is situated in a highly developed area, Chelsea are unable to expand in the same way as Manchester united.

One option considered by the club management was to redevelop the existing site and move to a larger, purpose-built facility in another part of London. For many years, Chelsea did not own their ground but rented it, and the ground is currently owned by a large group of supporters, the Chelsea Pitch Owners, who bought the freehold in 1997 to protect it from developers.

In October 2011, Chelsea Pitch Owners held a vote on a plan to allow the club to buy back the shares. For the plan to succeed, 75 percent of shareholders needed to approve the proposal; only 61.5 percent did so, however, primarily because many fans objected to the club moving away from its current location. The club issued a statement, saying, "Chelsea FC is naturally disappointed with the result. While we will remain as ambitious as ever, this decision could slow down our progress."

In late March 2012 Chelsea made a presentation to the CPOs saying; "It is no secret that while we are the fifth or sixth biggest club in Europe from a financial point of view, staying in the elite teams in the future is a challenge…it is clear to the board that a complete new build of a 60,000 seat stadium at Stamford Bridge has little chance of acceptability. A 60,000 new-build would cost over £600m and require the club to play away for at least three seasons…even if the economics were acceptable, the planning risks would likely be insurmountable (and) the incremental revenues would not even cover the hypothetical financing costs." In response, CPO stated: " We have hoped and felt that there might still be some way to expand the capacity of Stamford Bridge. Having seen the detailed analysis, we all felt that a persuasive case was put that this might no longer be feasible or viable."

Having been linked with moves to a wide variety of sites over recent years, including the redundant Earls Court Exhibition Centre, Chelsea and Westminster Hospital, Wembley, the Olympic Stadium, White City and Chelsea Barracks the club announced on 4th May 2012 that they had made a bid to buy the redundant Battersea Power Station 2.5 miles away from Stamford Bridge in south-west London. Chelsea acknowledged that they were not the only party interested in acquiring the world famous site on the banks of the Thames with its four iconic chimneys and Grade II* listed building status, but despite significant planning constraints they hoped to eventually transform it into a 60,000 capacity stadium, retaining many of the original features.

UEFA drop threatened transfer embargo

On 24 November 2011, Arsène Wenger's fear that UEFA would ultimately back down from taking punitive action against clubs when pressure was applied appeared at least partly justified when UEFA announced that following legal advice, proposals to impose player transfer embargoes on clubs failing to meet the FFP rules had been dropped amid fears that they may be legally unenforceable or might cause legal challenges from individual players. Lawyers advised UEFA that they may be open to restraint-of-trade civil actions brought by individual players who had joined a particular club on the basis that they were involved in Champions League football, but were now excluded from the competition because of the FFP regulations, which they themselves had not signed up to.

Reduced transfer spending

At the beginning of 2012, Manchester City manager Roberto Mancini, faced with a number of injuries and players absent at the African Cup of Nations admitted for the first time that because of FFP he had been told by club management that he would be unable to buy any new players during the January transfer window unless he first moved on existing players, and perhaps not even then.

Premiership spending in the 2012 January transfer window was down 70% compared to the same period the previous year. Across Europe a number of other clubs confirmed that they were not planning to buy players, tending to rely on loan deals for additional players during the transfer window rather than spending big on outright transfers, although this tended to lead to significant increases in club's ratio of wages over turnover. Even so, a Deloitte report stated, "Financial fair play has definitely had an impact," while Arsène Wenger remarked that "it looks like economically the whole of Europe is becoming a bit more cautious."

During this same period, the German Bundesliga, who had recently re-incorporated their league legislation so that it closely matched that of the FFP rules had announced a record profit for 2010-11 of nearly €2 billion (£1.7 billion) with an overall profit of €52.5 million. Christian Seifert, Bundesliga Chief Executive, said, "The measures for an improved cost control approved by the clubs in August 2010 have borne fruit."

Increased losses

Later that month, however, UEFA's club licensing report on top-flight clubs for 2010 (2009–10), the last full financial year before the regulations had been approved, showed annual losses in the main leagues topping €1.6 billion (£1.3 billion), a 36 percent rise on the previous year.

The survey of 665 clubs showed that 56 percent were in the red at the end of the 2010 financial year. Although UEFA pointed to some improvements in the situation such as the 6.6 percent rise in overall income, a small drop in the proportion of clubs' revenue going on players' wages, and an increase in the number of home-grown players in the Champions League these were the worst statistics on record. Most important of all, the report showed that if the full FFP rules had applied in January 2012, 13 clubs would have failed the break-even tests (net loss >€45M). UEFA's head of legal affairs, Alistair Bell, said, "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. 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."

The general secretary of European football's governing body Gianni Infantino said, "This is the last wake-up call. This trend has to change very quickly to safeguard European football. We must end this negative spiral and gamble for success, these losses cannot continue"

According to the report, only 6 clubs (among the 665 clubs) which competed in 2011-12 European competitions were out of UEFA standard of €45 million aggregate net loss (reduced to 5 clubs in group stage), plus additional 7 clubs which not compete in the Europe theatre. 12 out of 13 clubs were covered the net loss with re-capitalization or decrease in shareholder capital.

Moreover, among all top division club, 53% were exempt from FFP (344), while among the rest of 47% (306), about half of them made a profit 28% (179 clubs), with additional 9% (60 clubs) the net loss was within acceptable deviation (below €5M), while 8% clubs (54 clubs) had a net loss greater than €5 million but below €45 million, which these clubs may only pass if the net loss was covered by equity, instead of increase in debt. Lastly the 13 clubs were only accounted for 2%, made the passing rate may up to 98%. But, among the clubs with net loss between €45M and €5M, only 20 of them received equity contributions, made 47 in total failed to FFP simulation (34+13), with a passing rate of 92.7% (47 over 650 clubs sampled).

All the big-5 leagues had at least one club which did not break-even (>€5M), with other clubs in leagues such as Ireland, Wales and Finland exempt from FFP due to their size.

4 of the 80 clubs in the group stages of the 2011–12 European competitions had a wage to turnover revenue ratio of greater than 100%. In all, 78 top division clubs from the 663 clubs sampled had a ratio over 100% and 95 clubs had a ratio of between 80% - 100%, however this figure included the clubs exempt from FFP due to the size of their revenue and cost. Compared to the 2009 financial year, among all top division clubs (664 sampled), only 73 clubs with a ratio of =>100% and 88 clubs were between 80% to 100%, indicating that the FFP situation was worsening.

Italian clubs 'unable to comply with FFP'

In Italy, where the big clubs continued to rely heavily on TV money from the Champions League, only six clubs reported a profit during the 2010–11 season. Having lost one Champions League qualifying place to the German Bundesliga due to the recent poor performance of their sides in the competition, there was increasing concern at the stagnant growth of Serie A club's match-day income, sponsorship and, merchandising. Certainly the Italian league appeared to be falling way behind their major rivals; whereas a decade previously the total €0.9 billion revenue of Serie A was not far behind the English Premier League’s €1.1 billion, while the income of the Bundesliga, La Liga and French Ligue 1 were a long way behind at around €500 million, now, while the immensely successful Premier League's revenues had surged to €2.4 billion, the Bundesliga's and La Liga's earnings had now both caught up with Serie A at €1.5 billion with Ligue 1 not far behind at €1.2 billion

Particularly worrying was the state of Juventus', finances. Still recovering from the effects of the Italian match fixing scandal which saw the club relegated, Juventus published the largest loss in their history at €95 million. President Andrea Agnelli, who's company Exor owned shares in the Italian motor company Fiat, and who's family had long underwitten the club's spending, called the losses "intolerable," but said that they were necessary to keep the club competitive. In 2005, Juventus’ earnings had been the third highest in Europe but since then their revenues had actually declined by 33% (€75 million) Having failed to qualify for that year’s Champion’s League and with a €43 million drop in domestic TV income due to the new collective deal, wages over turnover had jumped from 67% to a massive 91%, way above UEFA’s recommended maximum of 70%. Despite launching a new share sale aimed at raising €120 million of new money and changes to their financial model in order to meet FFP, Juventus admitted that losses for the coming year were also likely to be high.

Elsewhere at high spending Internazionale, who during the previous five years had lost a massive €665 million, the club's management were now seriously considering how they were going to meet the new rules. Again, 20 years previously Inter's revenues had actually exceeded that of Real Madrid but now totalled only around half that of their huge Spanish rival. Having estimated losses of €60 million for the previous season the club actually went on to record an €87 million loss, raising concerns that management were unable to control expenditure, at least in the short term. Even during their "best" recent year, 2010, when they won the Champions League and sold players worth €72 million, Inter still made a €69 million loss.) One club official compared the state of football’s finances to the sub-prime banking crisis but vowed, "We will be ready to meet all the standards set by UEFA and we are working on various fronts. That means cutting costs and increasing revenues." Inter had already made a number of changes, including a salary cap of €3 million for most first team players, a lower basic salary (with higher bonuses for success), lower contracts for older players extending their contracts and the sale of expensive fringe players. Inter’s sporting director Marco Branca admitted that the club could no longer afford the fees paid in the past, declaring, "We have to organise our finances for the financial fair play rules in the next two years. We are looking for younger players now with great talent who we can develop."

Despite the efforts, Massimo Moratti warned, "We are not yet able to balance the books. I don’t know how Italian clubs will play in the Champions League in future, if UEFA’s fair play is confirmed."

On 29 March 2012 FIGC announced the annual report for Italian football, which showed an aggregate net loss of the Italian football clubs in 2010–11 season of €428 million with negative equity of €204 million Among the Serie A clubs, the total value of production dropped to €2.0312 billion with the cost of production increased to €2.306 billion; net asset (net equity) decreased to €150 million, with equity ratio dropped to a very low ratio of 5%. The financial total debt was also increased to €928 million, up from €619 million in 2009–10 season.

La Liga's lack of competitiveness

Elsewhere in the Spanish Primera Division, the only remaining big league still with separate domestic TV rights deals, there was rising irritation among the smaller clubs at the resistance of Barcelona and Real Madrid to follow the Italians in agreeing to adopt a more equal share of TV income. With the two massive clubs again racing well clear of the other teams at the top of the league while Real Zaragoza and Racing de Santander were facing administration, both clubs stood to earn some €120 million in TV money per year until 2013, whereas the previous season’s third-placed side, Sevilla, received only around €20 million from their deal. In comparison, in the English Premier League for the 2010–11 season, champions Manchester United received only 1.5 times more that the bottom club West Ham United from the collective SKY deal, whereas La Liga winners Real Madrid received 12 times the amount of bottom club Almeria in broadcast rights. A study by the consulting firm Sport+Markt showed that including non-domestic earnings, in 2010 the two big clubs each received almost 19 times more from TV than the smallest clubs in Spain's top division.

While Real Madrid and Barcelona occupied the top two positions in the Deloitte football money league standings for 2012, (Manchester United's drop was mainly due to the weakness of the pound) the only other Spanish club in the top 20 was Valencia at No.19 on total earnings of less than a quarter the level of the big two. In contrast, there were five Italian clubs among the top earners and six Premiership clubs in the top twelve. Despite an impressive display on the field, in 2009 Valencia was forced to temporarily halt work on a new stadium and delay players wages when its bank Bancaja denied it more credit, leaving Valencia having to sell some of their best players, including David Silva and David Villa

In April 2010, 27 out of Spain’s top 42 teams, including Barcelona’s city rival Espanyol asked the government to end the ‘extraordinary imbalance’ in the Spanish league by making negotiating football television rights as a group compulsory. Barcelona director Joan Oliver said the club was "radically" against a change because it would alter its business model. Esteve Calzada, chief executive officer of marketing agency Prime Time Sport said; "Real Madrid and Barcelona will try to make sure it doesn’t happen, but it’s inevitable. They have 80 percent of the television audience, but you can’t have a league without the other teams"

The harshest critic was Sevilla President Jose Maria del Nido, who claimed; "Madrid and Barca are robbing us and the rest of the league, they are taking what is not theirs, and they know it …they are the only clubs that can keep their best players, the rest of us have to sell our superstars just to stay within our budgets. The Spanish league is a much worse league than the other top divisions in Europe, the German, Italian, English and French leagues are ahead of us"

Eventually tentative negotiations began towards a collective Spanish TV deal provisionally for the 2015/16 season when all existing deals will have lapsed, however Real and Barçelona indicated that they would only be prepared to share some of the extra money that was negotiated with media companies. "We will never reduce in absolute terms our TV income, but in a relative sense, yes, it will be reduced," said Barçelona president Sandro Rosell. Overall it was felt the proposed changes would do little to dent the overall dominance of Real Madrid and Barcelona.

Rangers administration

On 14 February 2012 Glasgow Rangers, one of the two biggest Scottish football clubs announced that it had gone into administration following a winding up action by HM Revenue & Customs to recover unpaid income tax and VAT. HMRC alleged that Rangers had been underpaying tax for at least 10 years through its use of (then legal) Employment Benefit Trusts to pay staff, and claimed a total of £49m in back taxes, a figure which threatened to rise to £75m with penalties if the club lost the tribunal.

The club was already known to be some £31m in debt following years of stagnant growth in Scottish football revenue. Owner Craig Whyte admitted that following his May 2011 takeover he had borrowed £24.4million against the next 4 years worth of season-tickets sales to offset Rangers' annual deficit of £10m in running costs.. Fans of fierce rivals Celtic complained that if the allegations of tax irregularities were proven, Rangers had received an unfair financial advantage over their own club and should be stripped of the numerous trophies they had won over the previous decade. In the weeks following, top earning players voted to accept 75% cuts in their wages to preseerve jobs at the club and to save the £1m per month needed to stave off the threat of liquidation as the club looked for a new owner to deal with the debt problems..

Meanwhile Portsmouth FC was entering its second administration in three years after experiencing further financial problems, while in the Swiss league, Neuchatel Xamax was declared bankrupt on 26 January 2012 with debts of at least Fr8 million ($8.7 million). This followed a prolonged period of difficulty for the club during which player’s wages and social security payments had not been paid and it had been docked points and refused a licence by the Swiss football authorities. Hours later, their Chechen owner Bulat Chagaev was arrested on suspicion of financial mismanagement and of fraudulently claiming credit by means of a fake US banking document. On 1 March 2012 another Swiss club, Servette FC filed for bankruptcy only seven years after a previous bankruptcy.

Despite receiving four bids for Rangers from as far a field as Singapore, America and Germany, as more information about the club's finances became available the actual liquidation of the famous club became a real possibility on 5 April 2012 when it was revealed by the administrators Duff and Phelps that total debts could top £134m. On top of the £93m now being claimed by HMRC in various taxes, unpaid VAT and PAYE, there were various amounts owing to 276 separate businesses, individuals and public bodies including £26.7m due to the ticket agency Ticketus, £7.7m to fans who had purchased debentures in the club, £2.3m to twelve football clubs throughout Europe and the figure did not include liabilities to playing staff and employyes whose contracts were soon due to revert to their original terms. This would be a lot for a new owner to take on, and at least one prospective owner said he would only bid if the club first went into liquidation.

Proposal for Spanish football tax amnesty

With Spanish clubs providing 4 of the 8 semi-finalists for the two European competitions in April 2012, and with the national team concurrently world and European champions, the country itself remained in deep financial difficulties, with 23% unemployment, burgeoning public debt and almost zero growth. The 2008 slump in the Spanish housing market had left the big banks dangerously exposed and reliant on €152bn in loans from the European Central Bank (ECB), much of which was supplied by Germany on the condition that strict budgetary rules were followed by the Spanish government. In March 2012 the Spanish announced a €27bn austerity package coming on top of the €15bn euro package already agreed, however a compromise was later agreed with German finance ministers to reduce the yearly budgetary targets due to the ongoing recession.

With public spending slashed and tax revenues plummeting, there was astonishment when the Spanish Minister for Sport, Miguel Cardenal announced that the government was looking to write off the €1.3bn owed to the Spanish state by La Liga clubs (€700m in tax, €600m in social security). Cardenal stated; “It is unacceptable that any company, including those in football have a high level of debt and that's why formulas are being sought, within what is possible, to correct it” He revealed that the government was "working very seriously, swiftly and continually" to forgive the debts "within a reasonable period of time" and would ensure that they were never allowed to accrue again.

In Germany there was outrage at the plan. The newspaper Bild asked how long the German taxpayer was to subsidise the wages of Lionel Messi and Cristiano Ronaldo while Borrusia Dortmund’s Hans-Joachim Watzke said he would have "zero understanding" if the proposal became a reality. Bayern Munchen's chief Uli Honess commented’ Such a plan would be ‘unthinkable and a blow to other football clubs…we pay hundreds of millions to get them out the shit and then the clubs don't pay their debts. Amid a general strike in Madrid where young Spaniards came out in protest at 50% youth unemployment, the centre-left party PSOE called for a ban - as existing in Italy - on clubs with tax debts from competing in the league, while José Luis Centella of the Izquierda Unida opposition party said; "This is bad news for all the people who have lost their homes and suffered from the cutbacks, while there is this tremendous generosity towards football."

Bundesliga clubs were particularly upset that while they themselves had been living within their means, Spanish clubs enjoyed what they saw as special privileges which sustained their success on the field and that they continued to be given money to buy expensive players which the Spanish banks had themselves borrowed from other European countries (the biggest provider being Germany) who now effectively carried the risk burden. By now there were real concerns that Spain would be forced to seek a bailout as had Greece, Portugal and Ireland having got into similar difficulties, and that some of the money given to stabilise her economy via the ECB would later need to be written off as unrecoverable. Banco de Santander had received €43bn, Bankia €36bn, while La Caixa, who loaned Real Madrid the money to spend a world record transfer fee on Cristiano Ronaldo used the player as part collateral to obtain €18bn from the ECB. Atletico Madrid, who were due to play German club Hannover in the semi-final of the Europa Cup owed the Spanish state €155m (£128m), yet having sold Sergio Aguero to Manchester City for €50m and using the money to offset some of their huge tax liabilities they immediately signed the Colombia striker Radamel Falcao from Porto as his replacement for €40m (£34.7m using third party deals, while Hannover themselves signed a significantly lower profile player, Mame Biram Diouf from Manchester United.

There had in the past been accusations that Spanish football was to some extent protected by the government for political reasons and that regional governments and municipal authorities had provided direct or indirect subsidies, while banks themselves provided extremely cheap loans to clubs to buy players and had been unwilling to call in clubs’ debts for fear of upsetting customers who supported them. Despite a new law introduced in January 2012 authorising the authorities to relegate a club if it went into bankruptcy, similar threats to relegate Celta Vigo and Sevilla because of problems with their registration paperwork in the 1990s were ultimately dropped after massive pressure from the club’s fans. In May 2001 Real Madrid sold their training ground to the city council for €480m in order to wipe out a then €290m debt and to fund the purchase of the original Galacticos group of superstar players such as Luis Figo, Zinedine Zidane, Ronaldo and David Beckham. The EU believed that just prior to the sale the land had been deliberately reclassified to allow it to be redeveloped for apartments and thus inflate the price. Competition Commissioner Tilman Luder declared “We believe Madrid’s regional authorities may have overpaid”, however a later EU investigation concluded that no state aid was involved in the transaction and that no government resources had been transferred to Real as part of it.

It was also claimed that with no points deduction applying (as in other countries), going into liquidation was too attractive an option for Spanish club owners as a way of escaping their creditors as it did not directly punish the club on the field. While Spain's tax authorities denied that clubs enjoyed preferential treatment, the Association of Ministry of Finance Technicians (Gestha) said they believed that in fact a double standard did exist, with some local authorities providing direct subsidies and sponsorship and that whereas normal borrowers were required to provide real guarantees against debt such as property which could be seized by the bank in the event of a default, football clubs were allowed to offer less tangible assets such as future potential TV and advertising rights. The Secretary General of Gestha, José María Mollinedo said; “We recognise that football is a national sport and raises passions but this is no justification for the treasury not requiring the same sort of guarantees that others have to give,”

In Britain there were direct comparisons with the situation enveloping Scottish club Rangers; it was noted that if the Spanish government was as strict in collecting tax revenues as their British counterparts, the face of La Liga would be changed beyond all recognition, with numerous important clubs facing liquidation. Commenting on the tax write off plan, German MEP Elmar Brok concluded "Debt restructuring means state aid and violates competition rules. The EU commission has to look into it,"

Following pressure, on Thursday 16 March 2012 Miguel Cardenal announced that the plan had been dropped, saying "We are working to provide a solution to the problem. What the government can offer are policy instruments so that the clubs can cope with this situation, but neither will forgive the debt or provide more subsidies,"

European Union support for FFP

On 20 March 2012 it was announced that UEFA and the European Commission had signed a joint agreement intended to prevent clubs using the EU legal system to challenge the validity of FFP, for example by claiming that it conflicted with anti-competition legislation. This was an important step because for clubs in countries which are part of the EU, the European Court is the highest authority (above even a nation’s own supreme court) and the ultimate channel by which FFP might be challenged legally.

The European Union - who acknowledged the unique “specificity of sport” in the Treaty of Lisbon - policy on sport stated “good governance in sport is a condition for the autonomy and self-regulation of sport organisations”. The vice-president of the EC and the Commissioner for Competition Joaquin Almunia confirmed that the existing FFP rules were both valid and in accordance with European legislation, saying; "I fully support the objectives of UEFA's FFP rules as I believe it is essential for football clubs to have a solid financial foundation."

UEFA president Michel Platini said: "Our statement confirms that UEFA's Financial Fair Play regulations are fully consistent with EU State aid policy. The rules will protect the interests of individual clubs and players as well as football in Europe as a whole"

UEFA general secretary Gianni Infantino said: "Let us be clear, this is not a new law … if anyone was thinking of filing some sort of complaint saying FFP somehow restricts European competition law they would have to file it to the Commission. This is a big milestone in the enforcement of the break-even principle"

References

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• "UEFA Club Licensing and Financial Fair Play Regulations Edition 2010" (PDF). UEFA.com. 27 May 2010. Retrieved 24 March 2012.</ref>

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