The financial meltdown shifts focus to soccer's growing problem

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Perhaps it was always going to take the meltdown of the financial markets to get the folks who run the game to take an interest in things like ownership and debt. Whatever the case may be, it's better late than never.

Everyone from FIFA supremo Sepp Blatter to Michel Platini, president of UEFA, have warned us this week that the levels of debt and financial wheeler-dealing are unsustainable. And that UEFA may have to intervene with a licensing system that would bar clubs with excessive debt burdens from competing in tournaments like the Champions League and UEFA Cup.

The problem with their message is that the intelligent, reasonable parts have been mixed in with demagoguery, alarmism and -- dare I say it? -- even what some may consider a bit of xenophobia.

Let's start with the stupid bits, shall we? On Monday, Blatter lambasted the amount of foreign ownership in the Premier League; on Wednesday, Platini followed it up by saying that if you're a wealthy individual from Qatar, you should invest in Qatari football, not a foreign club.

These statements border on the absurd and do more harm than good because they detract attention from some of the real problems facing the game. Foreign owners do not equate to bad owners, just as domestic owners do not equate to good ones. In a global economy, people should be able to invest wherever they like. Banning foreign ownership -- or even criticizing it -- does no good whatsoever and, apart from being unfair, simply robs the game of funding.

On the other hand, their warnings about the huge debt carried by certain clubs ought to be heeded, though, here again, distinctions must be made. Chelsea's debt of $170 million plus is almost entirely towards Roman Abramovich, who also owns the club. That's like being in debt to yourself, which is hardly a problem. Arsenal's debt, around $550 million, is largely down to the building of the stadium, which is a tangible asset. In that sense, it's a bit like a mortgage. Again, that's not so much of an issue.

The real problem is the debt of clubs like Manchester United and Liverpool. The debts were incurred because the people who bought them borrowed heavily to take them over and then dumped the liability on to the club (or on a holding company closely linked to the club). Manchester United's debt is in excess of $1.3billion, which is more than three times its annual revenue.

That debt wasn't accumulated to buy assets (like a stadium or a stronger playing squad), rather it was generated simply so that MalcomGlazer and his family could buy the club without needing to put in too much of their own money. As a result, United needs to spend more than $60 million a year just to service the debt. As long as the club is very profitable (like last season, when it won the Premier League and Champions' League), it's not a problem. But what if something goes wrong?

Imagine United finishing fourth and facing AC Milan or Barcelona in the preliminary round of the Champions League next season and getting knocked out (a distinct possibility, given the competition's new formula). That would equate to a $50 million shortfall in profits. Where will United get the money to meet the interest payments? At that point, either Glazer kicks in some cash himself (something he has been very loathe to do) or the club will have to sell players. And that could lead to a vicious cycle.

In principle, a tougher licensing system than the one already in place is a very good idea, especially if you believe that clubs aren't just money-making companies to be bought and sold like ball-bearing factories or telemarketing companies. And it's not just a question of minimizing the risk of bankruptcy (which, in itself, is a worthwhile goal: To some of these owners, the clubs may just be an investment; to many fans they are much more than that). It's a question of leveling the playing field. Because the other kind of pernicious debt occurs when clubs simply overspend and rack up debt to attract top players.

Lazio won a league title in 1999-2000 after outspending everyone in sight, it it nearly went bankrupt a few years later. Was it fair that a club should be allowed to do that? You can say that the bankruptcy would have been an appropriate punishment, but what about the players and teams who played by the rules and did not jeopardize their clubs' future? They lost out on a title to a club that was wantonly irresponsible. How are you going to redress that?

I hope UEFA is serious about a licensing system that forces those clubs who want to play in the game's most lucrative competitions to abide by certain basic common sense financial principles. This doesn't mean throwing Manchester United out of the competition overnight. It does mean making sure that the debt is reduced year on year and that, in the future, nobody else be allowed to do what the Glazers did. Not because what the Glazers did was illegal (it wasn't, though we can debate whether it was ethical or not), but because what they did was dangerous to the future well-being of the club and the game as a whole.

But the only way UEFA can have an effective licensing system is if the game adopts a degree of financial transparency, so that we know exactly how much money is coming in and going out. And this would also mean creating a common accounting standard across the continent. It's ludicrous and idiotic that clubs in Italy and Spain can still list individual players as individual assets -- the much-abused "plusvalenze" system -- allowing them to inflate their balance sheet with some accounting sleight-of-hand. Forget gimmicks like salary caps, and focus instead on having open books and a responsible financial vision.

We don't really want to leave the game in the hands of the highly remunerated banking types who did such a fine job on the financial markets, do we?