FOOTBALL FINANCIAL CRISIS

The financial crisis has affected all the possible industries in the world, including sports. We know Formula 1 is trying to come out with drastic measures to sustain the competition at this difficult period of time. Football has never been different even since the last crisis. Here's a good article to give an overview of the impact of the crisis towards football. I just hope Newcastle United will not suffer the fate of Leeds United.

CLUBS MAY FACE A CRISIS
Kaka departure hints at problems to follow

By Dale Johnson
June 9, 2009

Kaka's move to Real Madrid should be the first of a catalogue of deals to herald in a new era of galacticos for returning Real Madrid president Florentino Perez, but it is more indicative of a shift in the modern transfer market.

With the global economic crisis making credit hard to find, many clubs who have been operating within debt are going to find it difficult to continue with their big spending ways.

AC Milan have never been a club which have needed to sell their star players. Chelsea courted Andrey Shevchenko long before the Italian giants finally sold him to Chelsea for £30m after realising he was past his sell by date. Perhaps the Milan of today would have been far more open to Roman Abramovich's millions.

Milan are losing €70m-a-year and know this cannot continue. The only way to put a halt to this is to sell their assets at a huge profit and then look to bring in other star names in order to do the same further down the line. It is a sign that one of European football's traditional powerhouses could end up like most others - speculating in the transfer market to operate. It is also an indication of how far Serie A's stock has fallen.

Alexandre Pato could be the next to leave, with Chelsea interested in signing the Brazilian forward, who only started playing for the San Siro club 18 months ago.

These problems are not restricted purely to Milan, of course. Valencia's debts are said to be in excess of £400m and the La Liga side, who could only manage to qualify for a place in the newly-created Europa League next season, have simply no choice but to sell their star players such as David Silva and David Villa. They have had to stop work on a new stadium while a solution is sought. Manchester City, Barcelona and Real Madrid, to name just three clubs, are hovering.

One club which appears unable to join that trio is Liverpool. With losses of £40m for the last year there has been a stark warning that owners George Gillett and Tom Hicks will find it hard to renegotiate their finances. The net debt of the club is now £299.5m and the owners' holding company, Kop Football, has credit facilities amounting to £350m which expire on July 24.

With refinancing a problem in the current climate it seems unlikely Liverpool will be able to splash out another £24m on a marquee signing like Fernando Torres. In fact, the two Spanish giants Barca and Real are said to be loitering with intent should the Merseyside club need to cash in on Javier Mascherano or Xabi Alonso. For a club which has come so close to winning the league title for the first time in 19 years it would prove to be a huge set-back just when they should be pushing on.

Other clubs, of course, are far from secure as the Glazer family loaded hundreds of millions of pounds onto Manchester United. The difference of course is that Manchester United's supreme commercial power - their ground alone is almost twice the size of Anfield which Hicks and Gillett have failed to move away from - will protect them unless they suffer the seemingly impossible fate of finishing outside the Premier League's Champions League qualifying places.

Milan have started to sell, Valencia will be next but there is no doubt others will follow.

Fans should be wary of the example set by Bundesliga outfit Borussia Dortmund, a leading European light around a decade ago as they won the German title, Champions League and UEFA Cup. But since winning the Bundesliga in 2002 they have suffered financial meltdown due to heavily loaded debt.

Their fate was sealed when losing to Club Brugge in the 2003 Champions League qualifiers. Without the millions from Europe's premier competition they had to sell the Westfalenstadion and within two years were on the brink of oblivion. Since 2003 the club has finished no higher than sixth in the Bundesliga and players such as Tomas Rosicky, Ewerthon and Jan Koller were sold.

Two other Serie A clubs, Lazio and Parma, are also perfect examples of recent financial meltdown.

Parma first hit trouble with the collapse of team sponsor Parmalat. At the end of the 2001-02 season they were forced to sell Gianluigi Buffon, Lilian Thuram, Sérgio Conceição and Márcio Amoroso. Buffon and Thuram alone raised £58m but still that would not be enough to stop the slide. Within the next two seasons they had sold Fabio Cannavaro to Inter Milan, Marco Di Vaio to Juventus and Adrian Mutu left for Chelsea. Their decline was such that they played last season in Serie B though bounced back at the first attempt.

And Lazio encountered problems which stemmed from a financial scandal involving president Sergio Cragnotti in 2002. They had been big spenders, having paid Parma £35.5m for Hernan Crespo and Valencia £29m for Gaizka Mendieta prior to Cragnotti's fall from grace. But they then suffered two years of turmoil with star players sold and only once since 2004 have they been in contention in the top half of the Serie A table.

In England, the demise of Leeds United into the third tier of the game is well documented, and there is a real possibility Newcastle United will go the same way unless they return to the Premier League within two years before the parachute payments of £11m-a-year dry up.

With the true affects of the current financial markets still to take full hold with the restructuring of debt agreements, there may be more high profile victims to follow.