End of celebration in European football: UEFA will set a “salary cap” for players

10 years after the European Football Association (UEFA) enacted its most stringent financial regulations on European football teams – the Financial-Fair-Play – it practically decides to abolish them. Instead, European football will move to a mechanism reminiscent of the American model of “ceiling” Salary “, according to which the teams will be limited in the rate of expenditure on the salaries of the players.

In the first phase the rate will stand at 90% of the team’s revenue and within two years the teams will be able to pay players only 70%. Groups that do not meet the wage threshold will suffer penalties that include dismissal from European establishments or “parachuting” to the less prestigious and rewarding establishments.

Big line for the transfer market

For a decade, UEFA struggled with teams through the financial fair play regulations that effectively set a limit on the amount of money owners could pour out of their pockets for teams. Of the richer Premier League teams of more than £ 3 billion and the murderous interest rates on loans threatened to collapse the business; the situation in Spain was also bad, with more and more club bankruptcy incidents across Europe. Out of 655 teams, about half finished the season in the red.

But the teams have always been one step ahead, and only in a few cases has UEFA been able to punish those who have exceeded them. Exclusion from the Champions League. But even then, City, in the Supreme Sports Court, managed to show the UEFA that in the legal test these regulations are very far-fetched and have room for interpretation.
The current UEFA decision now establishes a new mechanism that is very reminiscent of the “wage ceiling” practiced in the United States. From the point of view of UEFA, the idea is clear – the new mechanism is much easier to control, it is difficult to deceive it, and especially it will operate in the most problematic place today in football – the players’ salaries.

The great news of the new method will be in the transfer market segment. Since the restriction will only apply to “football-related activities” – or in other words player salaries and professional staff (and also to “depreciation” created for teams worth players) – it will not actually apply to the transfer market. That is, teams will be able to spend as much as they want for player acquisition as long as they meet the player salary limit.

This, it will be recalled, was one of the most severe limitations of the previous Financial-Fair-Play regulations which also included the player market within the expenditure clause. Meaning now? Wealthy teams will be able to acquire players almost indefinitely.

As stated, the restriction will apply mainly to the salaries of the players. Why about the salary? Mainly because it has become a major factor in group spending. Analyzes by UEFA and financial institutions such as Deloitte show that in a large proportion of cases, wages are what causes the economic situation of teams to deteriorate. Because of the salary paid to Leo Messi).

Annual increase of 14% in players’ salaries

The idea, revealed in the New York Times, speaks of a period of acclimatization in which the allowable ceiling for spending will stand at 90% of total revenue, and within a few years will drop to 70% of the club’s revenue. Some groups will not really feel the new regulations – the German groups, for example, which maintain a healthy model on a regular basis and stand on a wage item of about 50% of income. Even rich teams, like Real Madrid which stands at a wage rate of 57% of revenue, are not likely to feel the changes.

But for quite a few groups this will be an almost impossible task of fastening a belt in order to comply with regulations. According to the UEFA benchmarking report, which devotes an extensive chapter to the issue of wages, as of 2021 the average wage rate in European football stands at 77% of revenue – an increase over the year before the corona (2019) where the wage rate stood at 64% of revenue.

Some leagues will require a drastic change – in the English Premier League the salary rate in 2021 draws 74% of revenue (and some teams stand at over 90%), in Italy 78%, in Belgium 93%, and in France the situation is the worst of the significant leagues – 100% of teams’ revenue is diverted For a salary.

If you go down to team resolutions, then there will be some clubs that will have to make a far-reaching change in management – for example, in Manchester City, which holds some of the biggest stars in the world, the salary rate is 78% of revenue, in Milan 97%, Rome with 112%, and so on. Also in almost all Turkish groups. In Israel, by the way, a salary cut will be required – according to the report, in the year before the corona, the rate of salary expenses in the Israeli league was 78% of revenues.

The way to deal with the matter will be two-way – the first, to increase the revenue of the clubs. But it’s not easy at all. Sources of income have been stretched from all directions, broadcasting rights have swelled to such a level that it is already harder to get more, and money being funded through price and ticket price increases is a problematic issue.

So the way will be to address the other direction, which UEFA is also aiming for: stopping wage increases or at least a slow climb upwards. UEFA at 9.4% – the highest rate in a decade.

The latest report before the Corona shows that the 20 most lucrative teams in Europe recorded an average annual increase of 14% in player salaries. For some teams the desire to remain competitive has led to increases that are defined as dangerous – Everton recorded a 47% increase within a year, Barcelona 40%, Monaco 34%, Paris Saint-Germain 24%, Liverpool 22%, and a total of about a third of rich clubs would not meet guidelines today UEFA’s new wage ceiling.

The American model leaves a share to the owner

The idea of ​​treating players’ salaries in Europe is not new talk, but over the years UEFA has found it difficult to touch on the issue mainly due to the laws of freedom of occupation in Europe. During the Corona period, the state demanded wage cuts from the groups, as a condition for receiving the safety net.

It turned out that the “American model” of a wage ceiling is the winning model because it always leaves a large enough share for the owner to make money and put in his pocket (in the NBA for example, the ceiling is calculated according to 50% of income).

Due to the nature of European football activity we are going to see more and more money now being freed up in favor of player acquisitions. But it will not be easy – a team that acquires expensive players will eventually have to pay them a large salary to attract them. Events like those that took place last summer, when Lionel Messi moved to Paris Saint-Germain offering him a € 50 million salary, will now be almost impossible to carry out.

By Editor

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