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PSG mocks Financial Fair Play regulations

PSG mocks Financial Fair Play regulations

By Dhruv Shekhar

With Neymar having made his goal and assist-laden start for Paris Saint-Germain, the long running saga of his transfer from FC Barcelona was finally closed. Having already paid a record-breaking $220 million for the 25-year-old, PSG has bought on loan the new jewel of French Football: Kylian Mbappe. The 19-year-old is valued at above $100 million after his breakthrough season of 2016-17. With Neymar’s transfer already having piqued the interest of analysts and commentators around the world, it will be interesting to note how PSG will evade possible FFP sanctions by UEFA. In the event of a secondary transfer, it would be extremely difficult for PSG, in theory, to escape the aforesaid sanctions. This makes it worthwhile to examine what the ramifications of Neymar’s market-shattering transaction may have on PSG and the future of FFP. Additionally, it would be useful to assess the methods they may employ to evade any possible sanctions.

Why the possibility of sanction?

The FFP, which is an abbreviation for Financial Fair Play, is a set of rules introduced in 2010 by the governing body of European football-UEFA, to reduce the levels of debts that European clubs were operating on. The premise behind this is that a club should not spend more than what they earn, with the minimum statutory amount of loss initially set at $5 million, which the clubs could be allowed to operate on, for 3 years. This method was first changed in 2011, when instead of focussing on club debts, UEFA decided to put the focus on the club’s losses. Ensuring club models such as those adopted at Chelsea, Anzhi Makhachkala and Manchester City—of buying clubs with potential and then spending heavily to improve the squad and building a global brand—became a tough prospect. Success soon followed, as, by 2013, there was a decline in the combined debt across European top flight teams by $700 million.

Amendments to the FFP

However in 2015, realizing that the FFP in its then iteration was scaring off potential investors, further changes were introduced whereby proactive clubs could inform UEFA about any violations in the future. In addition, exemptions were provided for any money spent on infrastructural and youth development. Furthermore, UEFA has also allowed for owners to spend an additional €30m of their own money over a rolling three‑year period. Such an investment would only be allowed post an approval of the business plan by UEFA.

How PSG bent the rules

Now the key aspect for PSG is that FFP accounting allows for the transfer fees (which in this case amounts to €500 million) to be paid over the length of the players’ contracts-allowing PSG to possibly offset said costs by advancing far in the Champions League but importantly, by selling some of the players on the team. If young and experienced talents like Julian Draxler and Angel Di Maria, amongst others, have a possibility of being sold over successive winter and summer transfer windows with prices of the current market, PSG might have a way out.
Additionally, as per the last published accounts of PSG for the year 2015-16, their profit margin was in the range of €10 million on a turnover of €542 million. While details for the 2016-17 year are yet to be disclosed, the leadership at PSG expect to generate even more money from endorsements and sponsorship deals with the arrival of Neymar. Certain Spanish publications have even claimed that a way to deal with the transfer would have been Neymar receiving €200 million worth signing fee to serve a the ambassador of Qatar’s World Cup of 2022. This way his legal team would have bought out his contract on his own.

Not such a rosy picture

It is likely that any such arrangement would generate UEFA’S attention as in the past too, PSG has been on the receiving end of heavy sanctions under FFP rules after a sponsorship deal, arranged with Qatar’s tourist body, was deemed to have been of insufficient value to match the £167m PSG received for it. As per the current assessment period which runs through 2018, clubs can incur losses of €30 million. While an amount such as this might be achievable with the aforesaid measures to at least offset costs for the Neymar transfer, another potentially bank breaking transfer for Kylian Mbappe would make things doubly difficult for PSG. One where a canny bit of creative accounting might not be enough.

While in the near past clubs such as PSG and Manchester City have been accorded mere fines and player restrictions for breaking FFP regulations, in case of any violations, in this case, a ban might be imposed on the Neymar-led-PSG to contest for the UEFA Champions League in future seasons. An act which would serve as a massive blow to both the clubs and player ambitions.

Such an act, though severe, would be necessary to police a nation state from employing its financial might (Qatar owns PSG through its holding company-QSI investments) to subvert the transfer market and regulations imposed by the concerned regional governance body. Any inaction on the part of UEFA would not only set a wrong precedent for other clubs to follow suit but will be a disgrace to one of the most ungenuine attempts of regulating the financial health of sporting clubs in recent history.

Featured Image Source: Visual Hunt

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