Total Pageviews

Saturday, April 13, 2013

ICELANDIC FOOTBALL AND THE CREDIT-CRUNCH

In 2011, Pat's Football Blog decided to begin an investigation of sorts into how the credit-crisis of 2008 had and has been affecting Icelandic football in the years since. The following article forms the first part of a four-part series on the subject, and is followed by an article from someone directly involved with Icelandic football, a short question-and-answer session from an adviser to the Icelandic government, and, finally, a small statistical overview, with a list of Icelanders currently playing abroad.  

The story of the attempt to write an article on the subject of football in Iceland since the credit-crunch has been as long and as tortuous as the journey undertaken by Iceland and its people since the autumn of 2008, but, for better or worse, this is the finished article as it stands.
----------------------------------------------------------------------------------------------------------------

The credit-crunch, recession, economic downturn, call it what you will, has been with us since the summer of 2008, when, fuelled by foreclosures of homes the length and breadth of the USA which were forced on their owners by ailing American financial institutions, the US economy went into freefall. The domino effect which followed was almost immediate and certainly devastating, and virtually the first economy to collapse, that of the USA aside, was that of Iceland.

Theirs was the first European economy to hit problems, folowing the bankruptcy of local internet bank Icesave, which was a subsidiary of Iceland's third-largest bank, Landsbanki, in October of that year. Days earlier, Within days, Landsbanki, and another two banks, Glitnir, and the country's largest bank at the time, Kaupthing, had fallen into the abyss and into administration. Glitnir had been earmarked for nationalisation by the Icelandic government at the end of September 2008, but was placed in the hands of the receivers on 8/10/13, a day after Landsbanki. Kaupthing's fate was sealed the day after Glitnir's.

The chairman and majority shareholder of Landsbanki at the time of its demise was none other than Björgólfur Guðmundsson, the then owner of West Ham United. Guðmundsson had taken over the Hammers in 2006, buying up 90% of the club's shares, and had appointed Eggert Magnússon, who had previously sat on UEFA's Executive Commitee and was also at one time president of the KSÍ (the Icelandic FA), as chairman. 

Magnússon, meanwhile, who had also previously owned and was, in the words of UEFA, "CEO of an import/export and biscuit and bread manufacturing company," departed West Ham in December 2007, selling his 5% share to Guðmundsson. A little over 18 months later, in June 2009, Guðmundsson was also on his way out of Upton Park after an asset management company took over West Ham. Guðmundsson was eventually declared bankrupt by the Icelandic courts at the end of July of that year, with debts totalling almost £500 million.

After the collapse of the three banks, there then followed a period of unrest on the streets of Reykjavík, including weekly demonstrations - and the odd mini-riot - which involved protestors turning up at the Icelandic parliament, the Althing, with pots and pans and anything else which could cause a racket, which has subsequently become known as the Kitchenware Revolution, which lasted until the then coalition government resigned in January 2009.

Landsbanki were actually sponsors of the Icelandic top flight at the time of the credit-crunch; the bank signed a four-year sponsorship agreement with the KSÍ in September 2005, which was deemed null and void at the end of the 2008 season. The league was then known as the Landsbankadeildin; Pepsi sponsored the competition from April 2009, which became known as the Pepsideildin until the end of 2012; it is now known as the Úrvaldeildin.

Icelandic football has, almost miraculously, escaped the worst effects of the credit-crunch. No clubs have gone into liquidation, although wages have been cut and the number of foreign players in the Icelandic football league had gone into a sharp decline since 2008, when, according to figures released by Iceland's football overlords, the KSÍ (Knattspyrnusamband Ísland), an all-time high total of 215 non-local players were on the books of clubs throughout the five divisions of Icelandic football, including 44 in the top flight. The following year, the total had been reduced to 150, but rose again in 2010, when there were 165 foreign nationals plying their footballing trade in Iceland.

The KSÍ's Ómar Smárason told Pat's Football Blog in 2011: "In earlier years, mostly Balkan players came to play here, but the trend in recent years has been more from Scandinavia and the British Isles, although they do come from all over the world."

A number of clubs in Iceland were sponsored by banks at the time of the credit-crunch. According to Smárason, "all clubs that had a bank as a sponsor were affected, a couple were more affected than others..All the clubs that were hit the hardest did indeed have sponsorship contracts with banks." Neither the clubs nor the banks involved can be named because of confidentiality agreements.

"Handball and basketball were also badly affected, but I don't believe others were affected so much, because players in other sports are not being paid wages..The FA here held its ground. A large part of its income is in foreign currency." This was also presumably the case at the time of the credit-crunch.

It was estimated by the KSÍ in 2009 that around 30 per cent of the average Icelandic club's income at the time of the credit-crunch (i.e. the end of the 2008 season) came from sponsorship. This dried up as local sponsors felt the effects of the financial crisis, which led most Icelandic clubs suffering from a cash shortage due to devaluation of the Icelandic currency, the Krona (ISK), and also to one or two clubs losing virtually all of their sponsorship.

Many of the foreign players playing in Iceland at the time of the credit-crunch were being paid in Euros, which was fine before the end of the 2008 season, but thanks to the Krona's devaluation, their employers found themselves paying out two-and-a-half times more money to their staff than just a few weeks earlier.

A large number of contracts, involving both local and foreign players, were re-negotiated, and many foreign players moved on to clubs outside Iceland. Players' wages were cut; on the other hand, the credit-crunch has led to many more young players getting a chance in their clubs' first-teams in recent years.

Football in Iceland seemed to have been almost totally unaffected by the credit-crunch, according to Kristín Hálfdánardóttir, from the state-run television station RÚV, whose opinion of the situation, disclosed in 2011, was thus: "We can't see any indication that the financial situation is affecting the Icelandic clubs. They seem to be able to finance themselves through sponsors.

"The clubs are still getting foreign players and still paying domestic players (most of them semi-pros) so the effect isn't visible - if there is an effect.

"On the other hand, overall sports funding from the government has been dramatically reduced and is shamelessly low at the moment."

The Icelandic central government may well have slashed funding for sports and sport-related organisation, but they weren't the only ones. Several town and city councils in Iceland, especially Reykjavík, have drastically cut their spending on sports infrastructure in their areas; funding for everything from indoor football stadia to artificial pitches to stands has been cut or stopped during the past few years, although this was the case right across the sporting spectrum and has not solely affected football-related projects.

This aspect was also touched on by Gísli Gíslason, the former chairman of ÍA Akranes, who had this to say shortly before he became a board member of the KSÍ in January last year: "[A worsening] economic situation for the municipalities has also halted or delayed improvement of stadiums and also resulted in reduced contracts for operation costs -as some municipalities have a special contract of operation with sports clubs - mainly in Reykjavík and Hafnarfjörður."

(There will be more of Gísli Gíslason's thoughts from early 2012 in the second part of this series.) 

Ómar Smárason told Pat's Football Blog in January of this year that football does receive funding, albeit indirectly, from the Icelandic government - this subject shall be covered in greater detail in the third part of this series.

"The government allocates a budget to the Icelandic Olympic federation, which then allocates a part of that to its affiliated sporting associations, including the KSÍ.  The total sum allocated to the Olympic Federation is around 150 million ISK, and about half of that goes on to the affiliated sporting associations.  The FA gets around 3 million ISK of that.  The FA budget is close to 1 billion ISK [6.26 million Euros, as of 31/3/13].  This is pretty much the same every year."

The KSÍ, like just about every other organisation in Iceland, have not had it easy over the past few years, but, using the above table, have still been able to turn a loss of almost £860000 (1.02 million Euros) at the end of 2008 into a profit, albeit an extremely modest one, at year's end in 2012.

There seemed to be a reticence among the clubs in the Úrvalsdeildin to want to discuss the credit-crunch and its after-effects. Only a few of the 16 clubs to have appeared in top-flight football in Iceland since the beginning of the 2008 season until the end of 2012 replied to questions put to them by this blog over the past 2 years concerning any effects felt by the credit-crunch. KR Reykjavík's reply, delivered by spokesman Jónas Sigurðsson, was rather short and to the point; KR "deal with the situation and the club behaves according to the financial situation in the country each time and has been doing so for 112 years."
The last few years still seem to have been a bit of a struggle for KR, and for just about every other team in the country, as Hörður Snævar Jónsson from local football website Fótbolti.net told Pat's Football Blog in 2011: 

"Most of the clubs were affected by the credit crisis..Breidablik..had to release all of their foreigners after 2008. In 2009 they won the Cup and they won the league [in 2010]; they got a percentage when Gylfi Sigurðsson was sold to Hoffenheim from Reading and have been selling young players out of the country last year for good money, so they have money now. Players have had to take a pay cut, and KR..had to let all players take a 30 precent pay cut before this season [2011] so teams are still struggling."


"No team has had to shut down but many clubs can not pay players at time because sponsors are struggling to pay what they had promised.  In Iceland, youngsters have to pay to attend training and play for clubs so that has not affected anything.  In Women's football there is not a lot of money, only Valur has the money and they always win.


"TV rights [for domestic Icelandic football matches] are owned by a German company so that helps Icelandic football because the clubs get paid in Euros."

UMF Grindavík's former chairman, Þorsteinn Gunnarsson, said that things were less stressful for clubs on the south coast of Iceland: "As Grindavík FC is from a small fishing municipality, the club was not credit-affected like most other clubs in Iceland. ÍBV FC from the Westman Islands is in the same situation. In these 2 towns [Grindavík and Vestmannæyjar], fishing export is the strong foundation, the fishing companies are stronger then ever and they are the biggest sponsors so the football clubs have not been affected like the clubs in the capital."

Lúðvík Arnarson, a representative of Hafnarfjörður side and 2012 league champions FH, said: "In general all clubs in Iceland have been affected as getting sponsors has become much much harder then it was before the credit crunch. But, having said that, running a football club, here like everywhere, has always been a very difficult job to do and it has always been a struggle to make ends meet. Not just after the credit crunch."

The name of 2010 league champions Breidablik cropped up more than once during the course of this investigation; they suddenly found themselves in dire straits in late 2008, but one stroke of good fortune, as alluded to earlier in this article, helped pull them from the brink. Club representative Petur Ómar Agustsson recently gave his version of events.

"Like other clubs in Iceland Breidablik FC was hit by the credit crisis late 2008. All activities were toned down. Coaches and players took a pay cut. Sponsors pulled back and some sponsors never returned (became bankrupt). Very difficult but educational times. The club was able to make a quick turnaround financially when former Breidablik player, Gylfi Sigurðsson, was sold from Reading to Hoffenheim FC in Germany in 2009. Breidablik’s financial situation was saved. 

"The club paid all debts and has been doing quite well since, both financially and on the pitch. The club won the FA Cup in 2009 and the Icelandic league the following year. The year 2011 was a disappointment but second place in 2012 is the club’s second best place ever."

Perhaps the reticence of local clubs to discuss their financial situation could be in part attributed to the issue of confidentiality, which was explained in greater detail by Ómar Smárason at the beginning of this year; he was unable to state "which clubs were affected the most by the financial collapse because of confidentiality between the FA and its clubs, which is a part of our club licensing regulations.  

"If the tax authorities wish to review clubs´ finances then they would go directly to the clubs. The same applies to anyone making a query on club finances, they will have to go directly to the clubs.  FA board members are not allowed to be on the board of a club as well, and are also bound by confidentiality."

The credit-crisis has been both a curse and a blessing on football in Iceland. As has been previously mentioned, the parlous financial state of many clubs led to many foreign players leaving the country for greener fields, though the slowly improving state of the Icelandic economy has led to a sharp increase of expats playing in Icelandic football over the past couple of years. As earlier stated, there were 165 foreign players in 2010; this soared to 222 in 2011 and 227 in 2012 (there are no figures available for 2013). 

Strangely, the largest number of players involved in Icelandic football who hail from outside the country actually play in the lowest division. The total of foreigners playing in the fourth tier of football in Iceland rose sharply from 46 in 2010 to 79 in 2011, before dropping back slightly to a round 70 last year. This may be attributable to a large number of long-term immigrants and refugees playing football in the lower echelons of Icelandic football. It should be pointed out, however, that no figures were available for the fifth and bottom tier of Icelandic football, which unlike the top four (national) divisions, is played in three groups organised on regional locations.

With the exodus of foreign players in the aftermath of the credit-crisis came new opportunitites for the younger players on the books at local clubs, and they took them with alacrity. A fair number of them have gone on to establish themselves in the first-teams of several local clubs, and a substantial number of these players have gone on to carve out careers in continental Europe.

As of mid-January this year, a total of 78 Icelandic footballers, 63 male, 15 female, were playing abroad, and 20 of them were employed by clubs in Norway. One of the current crop is none other than Gylfi Sigurðsson, the man whose transfer from Reading to Germany's Hoffenheim practically saved his former club Breidablik from extinction when the club received a cut of the transfer-fee; he is now, of course, at Spurs, and is regarded as Iceland's most valuable player as far as the transfer market is concerned, according to a list published recently by an Icelandic website. Sigurdsson's brace in Ljubliana ensured a surprise 2:1 away win against Slovenia recently in World Cup qualification, propelling Iceland into joint second place in their qualifying group. Seventeen of the 20-man Iceland squad who travelled to Slovenia - including nine of the starting eleven - now play their club football in another country.

One of them, someone else not entirely unfamiliar to English football audiences, was Eidur Gudjohnsen; he recently made what will perhaps turn out to be the transfer covering the least distance between two clubs of any Icelandic player in a major country this season, when he joined Club Brugge from Cercle, fellow tenants of the Jan Breydel Stadium in the Belgian city of Bruges.

Now that things are looking up for the national men's side, thanks in large part to the young generation that came through in the years following 2008, comprising the Iceland under-21 team that made history by qualifying for a major tournament for the first time when it took part in the 2011 Under-21 European Championships, the senior women's team are busying themselves with preparing for this summer's Women's Euro 2013. They took part in the recent Algarve Cup, one of the most prestigious tournaments on the women's football circuit, though things certainly didn't go well in what what was a difficult group: they lost all three games, although they were up against the USA, China and the hosts of the forthcoming Women's Euro 2013, Sweden. They did at least defeat Hungary 4:1 in the ninth-place match.

They will be looking to improve on their performance in the 2009 version in Finland, their first-ever appearance at a major tournament, when they lost all three of their group games, though they were far from outclassed. 

This time round, come June, they will be up against Germany, Holland and Norway in the group stages when the tournament takes place in Sweden.

Club-wise, it has been a disappointing last few years for Icelandic clubs involved in European competition. All of the nation’s representatives in the Champions’ League and UEFA Cup in 2008-09 were already eliminated by the time the credit-crisis took hold, and since then only KR (Europa League/UEFA Cup, 2009-10 and 2011-12) have come anywhere near qualifying for the group stage of either the Champions’ League or the Europa League/UEFA Cup.

The average Icelander has had it pretty tough since the end of 2008; unemployment, wage-cuts and almost impossible mortgage rates led to serious discontent, though things are now finally looking up after the current governing coalition has had quite a successful time in charge of the country, with a welcome reduction in the unemployment rate, a policy of protecting the vulnerable in Icelandic society and immigration into the country back on the rise being but three positive side-effects.

There are still many hurdles to overcome, such as a woefully high government debt, a currency which has become even more undervalued than it was previous to the credit-crunch, and a high inflation-rate; a general election is also due to be held in the next few weeks which could see those in charge at the time of the credit-crisis back in charge, if recent opinion polls are anything to go by. Control of the political future of Iceland is, as they say, up for grabs..but why undo the good (although painful) work that has been done since 2009?

So what of the present and future with regard to football in Iceland? Perversely, because of the economic climate in Iceland in the years immediately following the collapse of the Icelandic economy, the various national selections were performing better than at any time during the last 20-25 years, at least partly due to the fact that, as many foreign imports had fled the coop in the aftermath of the Icelandic economy, local young players were regularly turning out for their clubs on match-day, instead of being stuck on the bench or in the reserves. This may have had an adverse effect on the quality of football on show back in 2009, but it has been of immense help since then, with regard to the current men’s national senior team, at least.

Now that the use of foreign players is again in vogue in Iceland, it could well be that opportunities for those Icelandic players on the fringes of their respective first-teams will once more become somewhat restricted; if evidence were needed, the dismal showing of the Under-21 team in their qualifying group for the UEFA Under-21 Championship finals, where they finished bottom, should provide some food for thought. On the other hand, the recent influx of foreign players may make Icelandic clubs more competitive on the international stage.

The question must be asked: will the men’s senior team emulate their female counterparts and finally qualify for a major tournament within the next 10 years? The chances of that happening are not huge this time round, but they are making a right fist of it, are still in the hunt after some encouraging performances in a group that no-one seems to want to top, and could still spring a surprise.

There are indeed several positives, such as the good performances of both senior national teams at the moment, the fact that there are several dozen Icelandic players, both male and female, playing abroad, the fact that the KSÍ are still holding their own financially, and the almost miraculous fact that no Icelandic clubs went under as a result of the credit-crunch, due to the hard work of a great many people. 

Much more of the same will be needed in the coming years to ensure that things in general in the country are kept on an even keel, but, for now, after having (in various ways) unfairly suffered years in the wilderness as Europe's first economic pariahs in the modern era, Icelanders can perhaps look forward to the future with a certain, if modest, degree of optimism. One could definitely say the same thing about football there, too.

------------------------------------------------------------------------------------------------------------------------------------
AUTHOR'S NOTE: Repeated attempts were made to obtain opinion from many sectors of Icelandic society over the past two years, and it has to be said that the response in general was more than a little disappointing. In spite of this, many and grateful thanks go to the following individuals for taking the time to express their opinions: Kristín Hálfdánardóttir (RÚV television station), Hörður Snævar Jónsson (Fótbolti.net football website), Jónas Sigurðsson (KR), Gísli Gíslason (ÍA), Þorsteinn Gunnarsson (formerly of UMF Grindavík), Lúðvík Arnarson (FH), and Petur Ómar Agustsson(Breidablik). Thanks also go to Einar B. Árnason, editor of the News of Iceland website (www.newsoficeland.com), for some useful pointers.

Above all, thanks are due to Ómar Smárason from the KSÍ, without whose help this article would never have seen the light of day. He kindly supplied much of the facts and figures contained above; other statistical information came directly from the KSÍ website (www.ksi.is).

Any data mentioned was correct at the given time; errors and omissions shall gladly be corrected if notification is given. Part four of the series has a more detailed look at the statistics alluded to in the above article. Please find below the links to the other articles in the series.

Link to Part 2:  http://patmcguinness.blogspot.nl/2013/04/icelandic-football-and-credit-crunch_9851.html
Link to Part 3:  http://patmcguinness.blogspot.nl/2013/04/icelandic-football-and-credit-crunch_955.html
Link to Part 4:  http://patmcguinness.blogspot.nl/2013/04/icelandic-football-and-credit-crunch_1163.html










 

No comments:

Post a Comment