Financial fair play explained

UEFA's financial fair play concept has been presented to the Culture and Education Committee of the European Parliament at a formal hearing in Brussels.

The hearing gave European football's governing body the opportunity to highlight its concept aimed at ensuring the future well-being of the European game, and explain the UEFA Club Licensing and financial fair play regulations, which have come into force after their approval by the UEFA Executive Committee in Nyon last Thursday.

The regulations are aimed at bringing about a situation which curbs the excessive spending and inflated transfer fees and player salaries that have endangered football in recent years. They call for greater discipline and more rational financial behaviour from clubs, and encourage clubs to operate more responsibly by not spending more than they earn, while settling their liabilities punctually.

The measures are designed to protect European football's long-term health and viability, as well as the integrity and smooth running of the competitions, and also stimulate long-term investment in areas such as youth development and the upgrading of sports installations.

UEFA's head of club licensing Andrea Traverso told MEPs that the measures had been of the utmost urgency, given the global financial crisis which had affected all sectors of the economy. For football's part, national associations, leagues, clubs and all other European football stakeholders had agreed on the necessity of the move. The chairwoman of the Culture and Education Committee, Doris Pack, said that numerous clubs had run up debts, leading to cases that had taken a dramatic turn of events.

Traverso presented the landscape of European club finances based on UEFA research and data from 2008, contained in its club licensing benchmarking report on European club football issued earlier this year. The aggregate loss of Europe's top clubs was €578 million. Some 65% of income was spent on average on salaries, and 47% of clubs reported losses.

Traverso said that the core principle of the financial fair play concept and the new regulations was the "break-even" requirement, under which a club must not repeatedly spend more than its income – thereby stabilising European club football finances over the long term.

The financial fair play measures, Traverso continued, were not a means of punishing clubs, but a way of helping them and improving financial standards within European football. He recalled that the European Commission had responded positively to UEFA's focus on tackling debt problems in the European game.

In addition, the European Parliament has already signalled its support for the financial fair play measures. Jean-Luc Dehaene, chairman of the Club Financial Control Panel set up, among other things, to monitor adherence to the requirements of the new regulations, is himself a member of the European Parliament.

William Gaillard, advisor to the UEFA president, told the hearing that the financial fair play measures had been launched at the same time that the financial crisis began in earnest. This, he said, had perhaps been a lucky coincidence, but showed nonetheless that such measures had been absolutely essential and had been taken at the right time.