UEFA on Thursday approved new licensing and ‘sustainability’ regulations to replace existing Financial Fair Play (FFP) rules, allowing European clubs to incur greater losses than before while limiting salary and transfer spending.
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Not surprisingly, European football’s governing body has decided to overhaul the FFP rules introduced in 2010 to reduce club debts that have been growing steadily across the continent.
While the boundaries of the FFP have been exposed with the emergence of state-owned superpowers such as Manchester City and Paris Saint-Germain, the massive losses suffered by the coronavirus pandemic have left poorer clubs little room to maneuver.
“The biggest innovation will be the introduction of a squad cost rule to better control the costs associated with player salaries and transfer costs,” UEFA President Aleksander Ceferin said after the authority’s executive committee meeting. Said.
UEFA will allow clubs to report losses of 60m euros ($65.5m) over three years instead of the previous 30m euros, and the allowable figure will even reach 90m euros for a club in “good financial health”.
However, this relaxation of the rules has been combined with new ceilings on salary spending.
Because UEFA has 55 member states and has to deal with European Union and national labor and competition laws, it has never been possible to set a specific salary cap as in North American sport.
However, under the new UEFA regulations, clubs will have to limit spending on player and staff salaries, transfers and manager fees to 70% of their total revenue until 2025/26.
The cap will drop when current contracts expire, 90% of club revenue in 2023/24, followed by 80% next season, followed by 70%.
“Before the pandemic, the average rate was below 70%,” said Andrea Traverso, UEFA director of financial sustainability.
The health crisis then pushed that rate up, resulting in losses of around seven billion euros over two seasons.
– Financial and sporting penalties –
Ceferin said violations of the new rules “will result in predefined financial penalties and sporting measures”.
The amount of penalties will depend on how far the clubs exceed the threshold, and this money will then be redistributed among the sages – in keeping with the idea of a ‘luxury tax’ advocated by Ceferin in the past.
Serious or repeated infractions will result in sports penalties, Traverso says, which could range from bans on the use of certain players and limits on squad sizes to points cuts for the League’s new group stage champions to be introduced from 2024.
He added that discussions are ongoing over the possibility of teams being relegated from one European competition to another, for example from the Champions League to the Europa League.
The fate of the FFP in its current form was sealed when Manchester City successfully applied to the Court of Arbitration for Sport (CAS) for a two-year ban from European competitions to be lifted in 2020.
Abu Dhabi-owned City has been accused of deliberately inflating the value of revenue from Emirati sponsors Etisalat and Etihad Airways to comply with FFP regulations.
State-owned clubs like City and Qatar-backed PSG can spend significantly more than their competitors despite the new 70% rule.
Meanwhile, traditional giants such as Barcelona and Juventus, the two main backers of the failed European Super League project, could see their ambitions limited even more by the need to reduce their debt.
The new regulations come into effect at a time when elite football is dominated by a smaller and more restricted group of clubs than ever before, but Traverso said improving the competitive balance requires more than just financial measures.
Now that UEFA has announced the new budget rules after months of consultation, the body will “open a new chapter and move on to other measures”, he said.
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