Questions about Inter’s mercato spending have raised speculation about their situation in UEFA’s Financial Fair Play guidelines.
With the signing of Geoffrey Kondogbia this week, Inter are spending somewhere in the range of 36 to 40 million euros on their new midfielder. It would be their third most expensive signing ever, only behind Christian Vieri and Hernan Crespo.
The nerazzurri have already made deals for Davide Santon and Xherdan Shaqiri earlier this season, both players arrived at the club on loan back in January. In addition to the large sum paid for Kondogbia, Inter have also spent 8 million euros on midfielder Gary Medel. Yet how can the club spend large sums on transfer fees and still abide by UEFA’s Financial Fair Play (FFP) regulations?
An article from tifosobilanciato.it by Marco De Santis explains how Inter are able to afford their new signings, under the UEFA FFP guidelines.
It’s important to note that FFP only accounts for the final budget, not individual transactions. In Inter’s case, it’s not true to claim that the club could not make any large purchases because of FFP, since UEFA only requires the balance at the end of the market between the clubs total revenue and expenditure. The purchase of a high-worth player is still possible, but the club would have to balance the budget among the rest of the team.
It is also not true to assume that since the nerazzurri are not participating in European competition next season that they lack abiding to FFP rules. Firstly, UEFA has specified that fiscal targets for 2015-16 are to be achieved if Inter wish for any hope not to be excluded from European competition in 2016-17. Second, a fine of 20 million euros from Inter (14M of which may be waived in the case of “good behaviour” in accordance to FFP) is to be made as a payment on participating in Europe. Since the 2010 Treble winners did not make it into European competition this year, UEFA awards zero fines. If Inter were to qualify for the group stage, it would incur a minimum premium cost of 6 million euro. This fine doesn’t count negatively for the calculation on any constraints of FFP, as Inter would still have additional income from the competition to achieve any economic goals. In the end, going to the Europa League would be great news for the Milanese club, rather than a disadvantage.
The administration for the UEFA FFP published a settlement agreement for Inter. Directly from the report, it states:
Operational and Financial Measures
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The club undertakes to have a maximum break-even deficit of EUR 30 Million for the reporting period ending in 2016 and of EUR 0 Million for the Reporting Period ending in 2017.
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Additionally, the club agrees that for the reporting period ending 2016 and for the reporting period ending 2017 the employee benefit expenses to revenue ratio is restricted and that the amortization and impairment of the costs of acquiring players’ registrations is limited.
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The auditor’s report on the club’s annual financial statements must always contain a favourable opinion with regard to going concern.
From this, Inter must be able to demonstrate that the club is progressing from year to year in various improvement of their accounts that allow for a positive view in the future of the club, both economically and financially.
It is believed that Inter’s budget for 2013-14 was 90 million given the market last year and with reductions to the budget, De Santis estimates that Inter’s budget for 2015-16 could be around 80 million. So how does the club recover the 50 million euros to get to the breakeven point of 30 million?
Inter would have to work to increase its revenue streams, decrease costs and operate on the market. The first two factors are difficult to speculate, especially with lack of information on specific financial information from the club. In the settlement agreement with UEFA, it makes several references to a credible economic plan that provides an improvement in Inter’s accounts, season by season. If Inter already began recovering costs and increasing revenue from the 2014-15 season,
De Santis explains an example of how Inter would be able to recover their budgets. Players like Juan Jesus and Guarin have a market value of 13 million and 12.5 million, if sold would bring in a capital gain close to 29.6 million [you may view the table & full breakdown of costs from De Santis here]. The nerazzurri also have a deal with Sunderland for player Ricardo Alvarez. The Argentine left Inter on a loan deal with a clause in the agreement to buy the player for 11 million euros (7.5M pounds) since Sunderland avoided relegation and will remain in the BLP next season. Inter have options to allow the budget to accommodate for the arrival of Kondogbia.
Mancini has made it clear to the club he wants a Champions League-level team, and he wants it now. The nerazzurri may need to adjust their books over the next few seasons to accommodate, but working within UEFA’s settlement agreement and having their signings pay off by achieving results on the field, Inter can find worthwhile return on their investments.
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