Download The impact of the Greek financial crisis on the Super League

Just a decade ago Greek football was on its finest hour. The domestic attendance where rising
and the Greek national team had just performed the greatest triumph ever to be seen in Greek
sports, winning the European Championship in Portugal. Since then the country has suffered a
rapidly decline and, in Europe, few countries seems worse off than Greece. In June european
authorities authorized a bailout, but despite allowing Greece to keep paying its bills the country is
still buried in debt, and still suffering from high unemployment.
In terms of sport the 2004 champions failed to qualify for EURO 2016 and domestically clubs are
struggling just to ensure their viability.
In this article I aim to provide a brief introduction to major macroeconomic factors and an
overview of how they relate to sports.
The financial crises that began in 2007 was preceded by rapid credit growth, abundant liquidity
and the development of real estate bubbles. On a largely regional scale such episodes where
seen in Asian countries in the early 1990s, but since it spread from the US it soon became global
causing thoughts back to the Great Depression of the 1930s.
When taking about the impact of financial downturns within sport industries it is necessary to
distinguish between the public (grassroots)- and private (professional) sector. Within the public
sector a financial downturn will often result in cuts in public spendings. For sports, this can
imply the cancellation or postponement of public investments in community sports facilities.
Again, when discussing the private (professional) sector it proves necessary to distinguish
between, the impact the financial crisis has had on top markets such as; NFL, PRL, MLS, NBA,
CHL, etc. And the impact the crisis has had on smaller markets such as the Super League in
Greece. Deloitte Money League serves as a great example on how the best european football
clubs have proved immune to past years of recession constantly increasing revenue,
regardless of the situation of the global market. Similar stories applies to the North-american
franchise markets within NFL, NBA, MBL and NHL.
For smaller markets, such as the Greek Super League, the financial crises has left them struggling
just to maintain their viability. To understand the impact of the Greek financial crisis on the
Super League key factors such as unemployment and inflation plays a crucial role.
Uemployment
Unemployment rate in Greece (%)
As shown above the current unemployment rate in Greece is almost 25 percent.
What began as a cyclical unemployment has now turned into long term unemployment for many
Greek people. Cyclical unemployment is caused by a downturn in the economic cycle. During a
crisis, activity is reduced which results in worker lay offs. Long-term unemployment occurs when
the economy of a country is suffering from a deep depression for a certain number of years, and
there are no short term possibilities of recovery in the horizon.
For the Greek Super League the country’s
decreasing wages, combined with the ever
increasing unemployment rate, has seen the
attendance plummet since 2009.
The danger within the current situation is
obvious. Unemployed fans with little money
can’t no longer afford to go to football matches
or buy expensive satellite packages. Additionally
most Greek clubs cannot help their fans since they are barely surviving themselves. The
domestically Super League has seen an overall decline in attendance of 59 percent - from peaking
7,622 in 2009 to 3,122 in previous season. As an obvious consequence 12 of the 18 Super League
teams averaged 1,500 spectators or less last season. The one exception is Olympiakos who with
17 titles in the last 19 season have kept flourishing mainly do to their Champions League revenue.
Inflation
Inflation is characterized as an persistent increase in the price level over time. Also there are two
types of inflation.
• Cost-push inflation: Inflation which occurs when firms decrease the supply of goods and services
in the market because of an increase in the real price of an important factor of production (e.g.
labor or energy inputs).
• Demand-pullinflation: Inflation which occurs when there is a persistent increase in demand for
goods and services that increases prices and temporarily increases economic output above the
economy’s capacity levels.
Inflation is a key economic variable since hyperinflation, inflation that accelerates out of control,
can destroy a countries monetary system. In late 2009 it emerged that the Greek government had
been misreporting their debt level and used public spendings carelessly. As a consequence the
national debt had risen to 130 percent of their GDP and the country had no apparent way to pay
back. As shown in the figure above the inflation rate in Greece increased by almost 6 percent
within a year, causing reduced purchasing power among the Greek people and the beginning of a
decrease in the value of their old currency, Dharma. In most cases when countries discover highly
increasing inflation, such as Greece in 2009, it results in instant deflation. But since the European
central bank (ECP) wouldn’t allow Greece to devaluate their currency or print more money, Greek
workers suffered a 30 percent cut as a consequence of the government being forced to stabilize
the national deficit back under 3% of GDP.
Inflation within the sport industry
Most sport inflation runs much faster than standard inflation. The rapidly increasing TV-deals and
sponsorships have seen the transfers and salaries sky rising past years. No where in Europe proves
this trend clearer than in England and the Premier League. Looking at the two following graphics
incredible similarities are to be found in the rise in money from broadcasting and the increase in
the average transfer-cost of players. The spikes and dips are virtually identical.
In Greece the impact of the country’s financial crises has left most clubs in the Super League very
vulnerable and with a impossible struggle ahead to regain former strength. While other leagues in
Europe are signing lucrative TV-deals most Greek people can’t afford, either buying a ticket to the
stadium or a satellite package. Furthermore the Greek clubs will struggle both to attract foreign
players and keep the best home grown players, since of Greece’s possible withdrawal from the
eurozone could result in devaluation of player contracts to less than half their original value.
As a consequence the Greek Super League is most possible to see teams further declining from
the European competitions coming years. This, do to the fact that most clubs won’t have money
to compete in terms of transfer fees and no TV-companies will have any interest in buying
exclusive right since the attendance are declining and people can’t afford satellite packages.