How the Eurozone crisis is tilting the transfer balance towards the Premier League
By Kieran Maguire
As if a £5 billion TV deal was not enough, the ongoing Greek financial crisis has stacked the cards firmly in favour of the Premier League as Europe's biggest clubs are left looking on in envy at their cash-rich English rivals.
It may seem insignificant to even the thriftiest holidaymaker, but a nine-pence depreciation in the value of euro to the pound (€1 was worth £0.80 in July 2014, now it is worth £0.71) has left clubs as grand as Bayern Munich and Real Madrid short-changed.
The wild fluctuations in currency exchange rates, which stands to benefit Brits abroad this summer, also has a profound effect on the football transfer market. The situation in Greece, which of course has far more serious implications for its citizens and many more outside its borders, is currently tipping the balance even further towards football clubs from England's all-powerful Premier League.
Every year, each manager is given a budget by his board and this will be quoted in local currency. So Jose Mourinho at Chelsea will be given an amount in pound sterling and Rafael Benitez will be given an amount in euros at Real Madrid. It seems obvious but this year, more than any other, the consequences are far-reaching.
Changes in exchange rate will impact upon a club’s buying power, especially if the club is buying from a country which uses a different currency.
Louis Van Gaal was given £150 million in the summer of 2014 by the Manchester United board; that gave him buying power in the Eurozone of €187m. Today that £150m would allow him to spend €211m in Europe. A significant difference of €24m.
With clubs impacted by Financial Fair Play (FFP) restrictions, juggling the budget is a bigger issue than ever before.
If Eurozone clubs are buying players from other Eurozone countries it would make little difference. The signing of Jackson Martinez by Atletico Madrid from Porto for €35m this summer, for example, is unaffected by the fall in value of the euro.
Club bosses would be far less keen to sign players from the UK and the Premier League in particular this summer because players are effectively 13 per cent more expensive now due to exchange rate movements. English clubs benefit, therefore, in many ways. Firstly, as shown above, their pounds can buy more from overseas due to the relative weakness of the euro.
English clubs are finding it much cheaper to sign overseas players in terms of wages, too. This again allows the budget to go much further. An international player signing for an English club in 2011 might be expecting a wage of €200,000 a week and a four-year contract. This would have cost the English club £37.8m over the life of the contract. The same contract today would cost the club only £29.1m.
That may be why top talents like Andre Ayew would choose an offer from a relatively modest Premier League club like Swansea City over staying in France with Olympique de Marseille or finding another club in the Eurozone. Likewise, it is hard to imagine Yohan Cabaye has taken a paycut to join Crystal Palace from Paris Saint-Germain.
Furthermore, many players have buy-out clauses that are quoted in euros. It’s now far easier for English clubs to trigger those clauses as the euro figure is far lower when converted into sterling.
When Angel Di Maria joined Manchester United in August 2014, for example, the transfer fee quoted was £59.7m. However, the price was in reality €75m - the buy-out sum in his Real Madrid contract using the exchange rate at the time. If United signed him now at today’s exchange rate his cost would only by £53.5m.
Similarly, Bayern Munich's €20m fee demanded for Bastian Schweinsteiger cost United around £14.4m this summer but would have been closed to £17m a year ago. So long as the trend continues, Premier League clubs will reap the benefits.
This summer it is certainly English clubs who are in a stronger position because of the weakness of the euro. But that can change. Since its creation €1 has fluctuated in value from between £0.57 and £0.98.
If European clubs believe that the euro will increase in value again, they may delay signing players from England in the hope that they will get more for their money for doing so. In practice this is unlikely to be the case. Player values can fluctuate wildly in a short period of time due to form, injuries and how desperate buying clubs are to fill particular positions.
In addition, forecasting exchange rates is incredibly difficult, and if bankers and currency traders can’t get it right, it’s highly unlikely that football club administrators can do it any more accurately.
The new 2016-19 domestic television deal just inked by the Premier League is worth over £5bn. That equates to at least £100m per season per team with prize money reaching as high as £150m for the winners.
The financial gap between the Premier League and the rest of the world is growing and fast. As the Eurozone crashes and burns, the British public remains relieved it stayed out of the single currency in the first place. Football bosses would concur with that as they capitalise on mainland Europe's struggles.
Source: Goal.com
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