EU May Veto Italy's 'Saviour' Law - 06/11/03

The EU is threatening to veto Italy's so-called 'saviour' law which has helped to keep many cash strapped football clubs afloat. It permits clubs to amortise costs of player contracts over ten years rather than the shorter life of the contracts. It now seems likely that Mario Monti and Fritz Bolkenstein, the EU competition and tax policy commissioners, respectively, are going to open formal investigations into the law. Mr Monti is expected to find that the law violates EU state aid rules, while Mr Bolkenstein is expected to rule that the accounting change violates EU and international norms. A final decision could be taken next Spring and according to the Financial Times could 'unmask the unusually incestuous relationships in Italy among owners, bankers, players, agents and politicians.'

The prospect of EU action has sent many of Italy's football club owners into a panic. Rio Semeraro, president of Serie A club Lecce, claimed that 'It would be the bankruptcy of Italian football', although others might think that it would be a much needed wake up call. Without the saviour law, AC Milan would have doubled its recently announced operating loss of €29.5m. Rome clubs Roma and Lazio each had losses topping €100m despite the law saving them tens of millions of euros. Both clubs have relied on backing from Capitalia, the Rome-based bank with political ties. Both teams have not paid full state taxes in years and owe players many months of back pay. Even Parma lost €35m.

The fact of the matter is that losses have been mounting for years, the result of rising salaries not matched by gate receipts or television income. Club owners have either ignored the problem or resorted to questionable financial and accounting methods, hence the saviour law. The day of reckoning may be at hand.