How the European Debt Crisis Buried Italian Soccer

For most of the last two decades, Italian clubs have dominated European soccer. Serie A had the highest UEFA coefficient from 1991 to 2000. Internazionale and Milan won three Champions League titles in the aughts, more than teams from any other country during that period besides Spain. Kaka, Zidane, and Fabio Cannavaro all won FIFA Player of the Year awards with Italian clubs and every player on Italy's squad for the 2006 World Cup final played in Serie A. Then it all changed.

Since Inter won the Champions League in 2010, Serie A has steadily declined. This year, Serie A's UEFA coefficient is below Portugal's Primeira Liga for the first time ever, making it the fifth ranked league in the world. Milan is the only club ranked in UEFA's top 20 and they aren't even in this year's Champions League. Only two Italian teams—Juventus and Roma—made it to the UCL group stages this year.

The foreign stars of Serie A's golden era have all aged out or moved on, and Italian teams haven't been able to develop new ones at the same pace as La Liga or the EPL. Serie A is still in the top tier of leagues, above the Dutch Eredivisie or the Turkish Super Lig, but it will keep slipping until its serious structural and financial problems are worked out.

It's not a coincidence that the worst of Serie A's troubles happened alongside the global financial collapse. The Eurozone responded to massive debts with austerity measures and bailouts, throwing huge economies into turmoil. Italy is one of the infamous PIIGS countries, along with Portugal, Ireland, Greece and Spain, that got hit the hardest. But while the top leagues in Spain and Portugal have been able to leverage modern soccer's lucrative nature despite their countries' economic struggles, Serie A has not. Only six Serie A clubs ran at a profit last year and total league debt is €1.5 billion.

Debt isn't unique to Italian soccer—EPL teams struggle with it and even Real Madrid owes €600 million—but the magnitude and timing of Serie A's particular debt crisis makes it harder to overcome. Tito Boeri, an economics professor at Bocconi University in Milan, wrote a paper on "The Decline of Professional Football in Italy" in 2012. Boeri makes note of a few structural deficiencies in Italian soccer.

Serie A is disproportionately dependent on TV money for revenues. This means the league doesn't self-generate as much money as other top leagues. When employment costs take up over 90% of club expenditures and the "superstar effect" is playing out all over European soccer, you get a system where clubs aren't able to bring in sufficient revenues to employ the types of global superstars needed to win Champions Leagues. Stars are sold to make up the difference, which starts a negative feedback loop where less TV money comes in because the league isn't as attractive.

Ideally, clubs can cut costs while staying competitive, but in his study, Boeri found that no Serie A teams have been able to find that balance. Udinese was the best at it, but they haven't been in serious competition for UCL spots the way they used to. The best way to compete without going literally broke is to invest in in youth development and free your club from exorbitant transfer fees. Boeri attributes Serie A's futility at this to its inability to adapt to an arcane, overly complicated administrative structure.

There is a way forward for Serie A, but it involves a lot of overhaul and clubs finally taking their medicine. Investing in a cantera and a scouting department instead of buying flashy players isn't sexy, but continuing down a path of financial recklessness is clearly unsustainable, even in the short term. Juventus is taking positive steps down this road, and Roma's new owners have done well to develop young players. They both have stars and UCL berths, but they'll have to walk the tightrope between monetary ruin and continental success with grace. If they fail, Serie A is at risk of turning into a dusty relic of a league.