Why one winger's transfer could spell doom for the EPL – but joy for England Earlier this month, an English player slipped quietly abroad in a transfer which could have big ramifications for the balance of power in European football.
When Jermaine Pennant signed for Zaragoza on a free transfer, most assumed that he had simply run out of options in England. As unwanted at Liverpool as he had been at Arsenal earlier in his career, he had failed to grab the headlines on loan at Portsmouth.
With wingers of his ilk hardly in vogue, no top-half clubs banging on his door and fans unwilling to forget his prison sentence for drink-driving, perhaps it made sense to try a different culture.He had, after all, been linked with AC Milan in January – and had been given the option of going to Real Madrid when Juande Ramos was desperately scouring Europe for anyone who liked chalk on their boots.
However, there's more to this economic migration than meets the eye. Maybe no top-10 clubs wanted Pennant, but freshly-promoted Zaragoza aren't a top-10 Spanish club. Last season wasn't their first outside Spain's top flight this decade, and while they may not be a West Brom or Wolves, they're not dissimilar to a Blackburn or Bolton.
But Wanderers lost to wanderlust, and Zaragoza got their man. And it may well be the shape of things to come. The English Premier League has grown accustomed to retaining its talent while bringing in the cream of Europe,
but the shifting sands of finances will make a victim out of more than just Gordon Brown.BECKHAM 1, BROWN 0The UK Prime Minister is attempting to claw back the money from the bank bailout (a fiscal "impetus" which would pay for 4,000 years of Parliamentary expenses, but that's another story) by raising income tax to 50% for anyone earning the top rate – and as £150,000 per year equates to £3,000 per week, that'll be most top-flight footballers.
That tax hike kicks in next April, but football's contract system means clubs, players and agents are already well aware of it.
By contrast, the Spanish government – in an effort to persuade overseas businesses to base their top executives in Spain – cut its top tax bracket from 43% to 24% for the first five years of a foreigner's stay in the country.
Real Madrid successfully argued that footballers should be included in that calculation, and it came to be known as 'Beckham's Law'.When Zaragoza offered Pennant £40,000 per week net, they knew they could swallow the £9,000 tax with change for a free villa and car. In England, where the headline wages are gross, clubs would have to offer Pennant £80,000 per week. No wonder Lancashire lost out to Iberia.The number-crunchers at Deloitte have worked out a formula that spells trouble for the EPL. In order to offer a player the same basic take-home, an English club will have to shell out up to 70% more than their European counterparts.Say John Smith asks for €3m a year – net. That would cost his club Milltown Athletic €6.8m per year, compared to €4m for a Spanish club, €5.4m in Germany, €5.7m in Italy and €6.7m in France. And with the Euro giving Sterling a battering that would make the carabinieri blanche, it's not getting better any time soon.Just as Steve McManaman became one of the first high-profile Bosman transfers when he left Liverpool for free to join Real Madrid, so Pennant's name may become a byword for a move which body-swerves taxes like a lithe winger beating a lumbering full-back.
MANCHESTER VS MADRID: AWAY WIN?Faced with a choice between Manchester and Madrid, players now have an economic imperative toward Iberia that will change the map of European football. Already this summer we've seen Florentino Perez sweep back into the Bernabeu bearing presents shaped suspiciously like Cristiano Ronaldo, Kaka and Karim Benzema.
Ronaldo's defection surprised nobody, while Kaka had long been more likely to move to Madrid than Manchester. But it was Benzema's decision to join the party that really upset Alex Ferguson – and, by extension, English football.
A young Wayne Rooney of a player, strong yet versatile enough to play across the front three, he should have improved in both ability and market worth during his stay at Old Trafford. In other words, the Frenchman would have been a typical purchase for the new-model Manchester United.
Those in the know at United have said that Dmitar Berbatov will be the last high-cost signing they make over the age of 26, the reasoning being that players are assets whose presence on the balance sheet should represent significant resale value later in his career.
So while Ferguson spent significant amounts on Rooney, Rio Ferdinand, Michael Carrick and Owen Hargreaves, there's a fair chance they'll either serve United to a ripe old age or make their money back in the transfer market. After all, some thought £12m was a lot to spend on a Portuguese show-pony overly fond of step-overs.
Of course, not everybody has Real Madrid's galactic budget. You could argue that not even Real Madrid have it, given they're now finding that their transfer targets are suddenly more expensive than they can afford – like £30m for a Xabi Alonso they could've had for half that last summer. That's what happens when you set a precedent for lavish spending.
But for all their merchandising muscle – weakened, of course, by CR7's defection – United now find themselves fighting an uphill battle against tax. Unusually, Ferguson may find himself in agreement with Arsene Wenger, who has warned that players will avoid England if they are financially punished. And Wenger's current star player agrees.
Interviewed by a Russian newspaper over summer, the likeable Andriy Arshavin expressed it simply. "If they do not solve the tax issues in England, it's possible that they will see an exodus of stars," said the Russian. In other words, Pennant will not be the last to head for Heathrow.
CITY vs CITYThen there's the influence of the City – two of them, in fact.
Across Manchester, the laser-blues are suddenly the rich relations. As summer progresses and they start throwing cash about like a man with no arms, Sheikh Mansour's money starts to skew the market further. John Terry earning £135,000 per week is one thing; the chance to double that at City further distorts the market.
Players like Terry will be paid what their employers think they're worth. But it's human nature that his colleagues will start to ask for more money. There's no doubt that raising the bar heightens expectations, especially in an agent-driven culture. If you double your best worker's salary, expect a year of arguments at annual appraisals.
Realism rarely kicks in. It's hard to tell the midfielder you bought that, frankly, he's not worth that much. Destroy his ego and you ruin his game. And as long as someone is willing to pay over the odds – perhaps through fear that someone else will get there first – average players get amazing wages.
That's what happened with the ITV Digital deal, when Football League clubs thought they were on for a Sky-style cash bonanza. Due to football's extraordinary post-Bosman time-shift finances – in which players get half-decade contracts to protect their market value despite clubs not knowing what division they'll be in next May – fat contracts were doled out before the money came in. When the money didn't come in, clubs nearly went out of business.
So faced with a double attack from the tax-man and Galactico Madrid, clubs will have to pay more money than ever before, even if the attendances aren't going up. In other words, these already over-leveraged businesses are going to have to seek more credit. The trouble is that just as one City starts spending money, the other City has seized up.
Perez and Mansour may not have noticed but the western world is in a deep recession caused by a lack of credit. Football, which exists on credit, has been lucky to survive this long and may not continue in its present form for much longer.
Financial results may be what you flick through en route to the football results but there are some key relationships there. On Thursday, shares of CIT Group Inc fell 74 percent among rumours it was headed for bankruptcy.
So? So they're the lenders backing the Molson family's $575m bid to buy the Montreal Canadiens from George Gillett, a deal without which the American's part-ownership of Liverpool FC looks very shaky indeed. CIT have also "arranged financing" for the Glazers' takeover of Manchester United.
Don't ask us, ask an academic. "It's indicative of how little capital will be available for sports owners, especially if they want to do any kind of refinancing or take on additional debt," says Robert Boland, professor of sports management at New York University. "The pool of sports financing has collapsed over the last few years."
Suddenly, the City results aren't only of interest to Mark Hughes. Just as English football needs to be backed more than ever, the house of cards is collapsing.
MAKING THE BEST OF ITSo let's recap. Tax laws mean Spain is an attractive destination for British players – not to mention top foreign players: ever wondered why Zlatan Ibrahimovic hasn't been linked with Chelsea? And English clubs, particularly the top four, are swimming in a cesspool of debt with creditors starting to knock at the door.
What's the endgame? For a start, expect more of England's top talent to move to La Liga. No disrespect to Pennant, but he might not be the biggest name to make the switch. Although the likes of Steven Gerrard have never been linked with a move abroad, that's partly because the Premier League has been the richest in the world.
Now, with the financial powerbase shifting, we might see a return to the days when players seek to "broaden their horizons" by "getting some continental experience". Stuart Pearce's current England under-21 players can expect a spell abroad – if they're good enough. Perhaps Lee Cattermole's career will embrace Middlesbrough and Madrid, Fabrice Muamba's Bolton and Barcelona.
And perhaps that's no bad thing. While English football has been blessed by foreign talent, its players are still susceptible to insular parochialism. If their eyes are opened, a spell in a different culture can only improve them.
Meanwhile, we can no longer expect England to be the prime destination for any foreign player who fancies a new challenge. The EPL still has cachet but Spain are the European champions, who play a wonderfully effective football which reflects their culture. Oh, and it's a bit warmer. And it pays better.
We'll get used to it. It's not actually been that long that we've had the run of the sweet shop. The Premiership-era renaissance started at the margins with players who had few other choices. Ruud Gullit was ageing, Gianfranco Zola unwanted; Dennis Bergkamp had failed at Inter, Patrick Vieira at Milan.
But again, turn that on its head. For every Jay-Jay Okocha there has been a Benito Carbone. For every genius who has graced the game there has been a chancer who took the squad place of an academy graduate. It's entirely possible that the wiser clubs might spend more time and energy on the future of our game.
More game-time for academy players means a wider pool of selection choices for the national team. Having top players with wider continental experience can't hurt, either. It's entirely possible that being a culture based on manufacture and exports rather than credit and imports might prove beneficial for England.
So if the Three Lions win the 2022 World Cup, perhaps we should raise a glass of sangria to Jermaine Pennant
http://fourfourtwo.com/blogs/fourfourtwoview/archive/2009/07/17/how-jermaine-pennant-could-ruin-the-premier-league.aspx A very solid article. A must read.
The increase in tax directed at those earning £150,000.00/year and above (£3000.00/week) by Gordon Brown's administration may have a very negative effect on the EPL
