Looking glibly at the strongest leagues in Europe, one could quite happily believe that all is well in the land of UEFA. Scratch the surface however, and you get a pretty nasty smell.

After a rocky few years, a drop in revenues and the odd scandal thrown in, Serie A is getting its house in order and its top teams are still a force on the continental scene. Spain’s La Liga has never been stronger with Barcelona playing arguably the best football ever seen and Real Madrid trying to rebuild with Jose Mourinho and a new era of Galacticos. The Bundesliga is powering forward with advancement in European competition, a flourishing youth system and a league which is barely rivaled in terms of competitiveness. Finally, the Premier League. Where do you begin? More money being thrown around than you could ‘sheikh’ a stick at (pun intended). Mega stars at the top clubs, influential continental players happy at the mid-table clubs and some real gems being turned up at the lower end of the league. Even the newly promoted clubs are holding their own.

A UEFA Sticker. Photo Courtesy of Chemical Brother

But would you be surprised if I told you that out of the above paragraph, only one of those sentences paints a picture that comes anywhere near the truth? It’s like catching the eye of a beautiful woman. You get to know each other, the sun shines and the birds sing. But it’s not until you wipe off the make-up, remove the fancy robes and begin to look deeper that you realise that things aren’t quite clicking.

The truth is, the economies of the other leagues are torn to shreds and bursting at the seams. The Germans’ foresight and willingness to act unprompted puts to shame the inclination of the other leagues to turn a blind eye, cross their fingers and hope. In fact, to describe the financial state of European football as a mess would be a gross understatement.

UEFA is all too aware of this. As of the start of the 2012 season, new rules will be in place which, the governing body hopes, will curtail this culture of “spending at will” within the current elite. Plans were announced in 2009 to give the continent some time to basically pull its finger out and get its finances in check. These clubs are a long, long way off meeting the criteria.

A report at the time of the UEFA announcement found that half of the top clubs in Europe were losing money – 20% saddled with massive debt. Eyes roll at UEFA HQ and when they finally come to rest, they are sharply pointed toward the Premier League. In recent years all but one of the “big four” clubs have been bought up by foreign investors and essentially privatised. Only Arsenal still remain afloat, although their largest single shareholder is American. 33.1% of the club remains in the hands of four English investors, yet two of the four hold less than one percent each. Russian oligarch Roman Abramovich arguably started this nouvelle mode with the purchase of Chelsea back in 2003 as a hobby and a passion, followed by the Glazer family’s all-business takeover of Manchester United in 2005 and the ill-fated Gillett/Hicks buyout of Liverpool in 2007. Gillett and Hicks are now gone, with new owners New England Sports Ventures trying to steer the north-west club through some murky waters. This succession of takeovers came to a head with the sale of Manchester City in 2008, who are now owned by the uber-rich Sheikh Mansour.

A total of nine clubs are now entirely in the hands of foreign owners. Almost half the Premier League.

Under the new rules, these sugar daddies will no longer be able to subsidise transfers and salaries. The clubs will have to operate solely from their own income and will be expected to break even over a rolling three-year period to continue their participation in European competition such as the Champions League and the Europa League (or however it may be known by 2012).

“Our intention is not to punish them but to protect them [the clubs],” said Michel Platini when the rules were announced. “The philosophy is that you cannot spend more money than you generate.”

Sounds agreeable. OK, so the rich owners can’t throw their cash into the pot any more to top up any relevant fees, but the clubs should be fine otherwise, right? Not entirely. Over the last 14 months, Abramovich and Mansour have written off their respective clubs’ debts. For City that will undoubtedly help but it doesn’t entirely clear all hurdles in the way. They have to somehow reduce their ever-growing £133m wage bill, despite it rising from £83m in the last year. Their entire turnover for this same period was £125m. To get them to a point where the books are balanced and they operate solely on what they make is going to be a huge challenge while trying to build the club into an elite force and a brand.

Chelsea have already made a start on this. In the early days, their new owner picked up the tab, but soon the cash-flow was pinched and Abramovich has gradually reduced his financial backing in an attempt to diminish the clubs dependency on his wealth. Their losses decreased steadily over the subsequent years, dropping from a record £140m in 2005 to £44.4m last year. Liverpool made a similar loss of £40m over the same period and will have to look at selling some assets to ensure they meet UEFA’s criteria. One asset beginning with “F” and ending with “ernando Torres” would wipe that out, providing he can remember where he last left his form. Manchester United is a bit of an unknown quantity. They make a profit on turnover, but are saddled with enormous debts, at one stage rising high enough to almost tip the £1bn mark but now believed to be in the region of £500m after some restructuring of the debt and the Glazers paying off £200m in late 2010. Rumours have surfaced that they may have been loaned some cash from a Qatari group who have ambitions to take over the club themselves. Cart before the horse anyone?

Abramovich watches his "plaything" - photo courtesy of John Dobson

While the Premier League is seemingly available to the highest bidder, finances on the continent aren’t in a much better state. La Liga in Spain has issues all of its own. Real Madrid is famous for its spending power, but what of the club’s finances? After their £226m spending spree in 2009 including the £80m capture of Cristiano Ronaldo from Manchester United, their debt was reportedly approaching £300m. In 2001 the sale of the training ground wiped Los Merengues’ debts of €270m and allowed them to engage in the first era of the Galacticos. To amass debts of around half a billion pounds over one decade is verging on insanity and entirely unsustainable. Their competitive rivals Barcelona are in no better shape with debts of £369.5m. Traditionally, the Catalan side has never had a shirt sponsor. This changed in 2006 when the club signed a 5 year deal to carry the Unicef logo on their chests, for nothing. That’s not completely accurate; Barcelona actually agreed to donate £1m to the UN agency’s projects every year. It’s now been revealed that a new deal has been signed with The Qatar Foundation, a non-profit organisation who will pay between £125m and £150m over 5 years to have their logo displayed alongside the Unicef brand, for next season at least. The club’s debts have clearly brought them to a point where they can no longer afford to turn down lucrative sponsorship deals. Mallorca may have come up with the most original idea to relieve their debt. They believe that the tourist market is an untapped resource and are looking at plans to try and squeeze every penny out of visitors to the holiday island by getting them along to matches.

Serie A has plans to emulate an English idea. In May 2009, 19 of the 20 league sides voted in favour of separating from Serie B and forming a breakaway league, similar to the English Premier League. Italian sides came under fire after only Udinese reached the quarter-finals of a continental competition in their 2009 UEFA Cup campaign. The clubs argued that they were unable to compete with the wages in England and Spain. Lega Serie A went live on July 1st, 2010 and on the same day, Lega Calcio folded; leaving the top sides free to sign their own TV contracts and establish their new division. They’ll have to wait two years however, as the defunct Lega Calcio had already signed €1.7bn worth of deals with Sky Italia, Mediaset Premium and Dahlia TV. The Serie A clubs do have control of the income and what’s rather concerning is that it is up to them to decide how much of the money, if any, should filter down into the leagues below them.

Germany is indeed paving the way to a healthier model. But what defines the “best” league? Is it the financial power? The star players? The quality of the football? Or the success of the clubs domestically and on the continent?

The accolade of the best league in the world has been passed between Italy, Spain and England for the best part of two decades now. Traditionally Italy had the big players and high quality, Spain had the glamour and entertainment while England had the passion and the fans. The Bundesliga never really gets mentioned. Over time Italy’s dominance has faded. Rocked by scandal and poor showings in European competition, the once mighty league had to concede ground and the big names to Spain. Consistently a joy to watch, Spanish football is in something of a golden period right now. The national team are both World and European Champions, while domestically Barcelona have crafted a brand of football few can dispute as being the best in the world. With spending power however come the stars and this is the point where England steps in. Already regarded as having the most passionate fans in the game, the league needed success on the pitch to promote itself and bring in the big money and the big names. If you build it they will come.

An influx of high profile foreign players ensued over the “noughties” and when coupled with modern stadia and success in the Champions League, the Premier League raised the bar.

And now for something completely different. Until recently, Germany’s model was to have “members” own the clubs. They realised this was not the best way forward if they wanted to remain competitive in Europe, and introduced the 50+1 Rule. Members would own 50% of the club, while the other 50% would be sold commercially. The members keep one extra vote (50+1) on the commercial sales, meaning they retain control and it becomes an impossibility for clubs to be bought and owned privately. They also have strict financial rules and regulations meaning the clubs must declare their solvency to qualify for a place in the league. If they can’t, they will be punished. Arminia Bielefeld were docked 4 points and issued with a £45,000 fine for falling short in March 2010. What is clear in all this is that in Germany, it’s all about the fans, not shareholders or owners.

The model in the Bundesliga means that the clubs are debt-free and can pass on the benefits to the fans, who pay as little as £11 to go and see the mighty Bayern play. Season tickets are similarly much cheaper and to become a “member” at Schalke for example will set you back a mere £86. You can’t even accuse them of having such cheap prices to simply get bums on seats. According to Deloitte’s Annual Review of Football Finance in 2009, the German top division had an average of 8,000 more people per game than their English counterpart, while the Premier League suffered a loss in revenue over the same period.

FC Koln fans. Photo Courtesy of woweezowee

People will argue that the model, whilst creating an apparent financial utopia, is still holding the German clubs back. They don’t challenge as consistently in European competition, nor are they able to hold on to their top talent quite as easily as Spain and England. Indeed, there is even dissent amongst their own ranks. Martin Kind, president of Hannover 96 is a fierce critic of the 50+1 rule, even taking it to court. His proposal was rejected however, almost unanimously, by 32 of the 36 Bundesliga clubs. The measures have in turn meant that in Germany, they’ve had to turn to youth development. Anyone who watched the 2010 World Cup in South Africa will know how that’s working out for them. England’s drubbing at the hands of Germany at the tournament could even be viewed as a product of the Bundesliga v the Premier League.

The issue that needs to be addressed for the rest of Europe however is one of escalation. The need to compete. It’s great having a rich owner to bank roll your club, or selling your stadium name to sign a new player or even just to keep one by upping his wages but where does it stop? What do you sell once you’ve sold everything else? Where do you draw your funds from when the UEFA rules come in to place and the owner can no longer fuel the gravy train? Germany are only unable to compete at the moment because the other leagues don’t have the restrictions they do. It is those restrictions however that will see their clubs and their league stride solidly through the next decade, a decade in which the other major leagues in Europe will undoubtedly be brought to their knees. The clubs will be sent back to the stone-age unless they can come up with huge financial solutions, and fast.

The fans are revolting after years of price rises and their clubs finding any way possible to eke more of their hard earned cash out of their wallets; with Arsenal reportedly on the verge of breaking the £100 barrier for a non-corporate seat at the Emirates. The time is coming where this will all have to stop. While players can be sold on, owners can sell up and walk away and teams can be rebuilt, who is left to pick up the pieces? Who are the people left to suffer through the dark years? The fans. The road ahead is one which should be filled with concern and dread for the fans of the clubs. The question is, just how long is this road, and where does it lead?

We should all hope that this road quickly becomes an autobahn and takes us directly into a new age of secure, solvent and competitive European football.