European Football in Financial Trouble

“The 10 most indebted clubs in European soccer collectively owe $5.74 billion between them.”

Wow.  That quote comes from a very interesting ESPN article about football finance.   The article deserves a careful read.  It documents widespread financial problems in most top European football leagues. And IJSF associate editor Bernd Frick is quoted in the article.

From an economic perspective, these financial problems are not unexpected.  European football clubs are not profit maximizing organizations.  The commonly accepted organizational goal for European football clubs is win maximization.  The promotion and relegation system in place in European football leagues provides a powerful incentive to try and maximize wins rather than maximize profits.  Economic theory predicts that win maximizers will spend money on talent like drunken sailors in order to one-up their equally free spending rivals.  According to the article, Real Madrid and Barcelona (and fellow La Liga member Valencia) are all deeply in debt.  So deeply in debt that the may never be able to repay it themselves.  Yet Both Real Madrid and Barcelona were very active on the transfer market this year.  The same is true in the English Premier League, and other leagues around Europe.

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