Bolkestein readies yellow card for Berlusconi

By Peter Chapman

Date: 24/06/04

FRITS Bolkestein, the commissioner for the internal market, is on course for a clash with soccer fanatic Silvio Berlusconi, the Italian prime minister, over a law on football club finances. Berlusconi, former president of AC Milan, is being told to scrap a law that helps Italy's hard-up clubs to escape liquidation by overstating the value of their players.

The law, announced last year, allows debt-ridden Serie A clubs to write off the "value" of players in their balance sheets over a ten-year period instead of the period that they are actually contracted to play for their team, typically three years. That means balance sheets are insulated from big drops in the valuation of players.

Officials say the shift is contrary to EU accounting rules which state that assets should be written off during their economic life - in this case the term of the contracts.

Though the ten-year write-offs are little more than a "window dressing exercise", officials say they have a real effect because they can help to ward-off liquidation proceedings by keeping the balance sheets viable.

Bolkestein's spokesman Jonathan Todd said the Commission has been in talks with the Italian authorities over the issue - but he said that the problems have not yet been solved.

Officials do not rule out last-minute changes. But if the Italians fail to yield, it is understood that the Commission will issue a reasoned opinion next month - the last stage before taking the case to the European Court of Justice.

Competition Commissioner Mario Monti has already dropped a state aid investigation into the "Save football" law, approved last year, but only after Italian authorities promised that it would not be used to grant illegal tax benefits to clubs.

Monti said that special tax treatment linked to the player depreciation could have distorted competition and had an effect on trade between member states.

That is because the top Italian teams compete on international markets - for example in the acquisition of players and the sale of broadcasting rights for European competitions, such as the UEFA Champions League.

Several of the larger Italian clubs are listed on the Milan stock exchange, including European champions AC Milan, Inter Milan, Lazio and Roma, and have used the amendment to write off huge losses related to the fall in players' values on the transfer market.

Inter has reportedly written off player value to the tune of €319 million, AC Milan for €242m, Roma for €234m and Lazio for €213m. Former Italian champions Juventus are the only major club not to have exploited the decree.

Monti was concerned that the amendment was a form of aid from the Italian government that gave the country's clubs an unfair advantage over their European rivals.