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The lure of Europe -- fact and fiction

If you are in the camp that believes the European "vacations" about to be taken by Josh Childress and Brandon Jennings mark the end of the NBA as we know it, now might be the time for a rethink.

After the dust has settled on a hectic month of transactions -- many of them seeing players head east across the Atlantic to Europe -- it's time for reflection and analysis.

The knee-jerk reaction by some when Childress rejected the Atlanta Hawks to sign with Greek power Olympiacos was that the global basketball landscape had changed for good; that only a drastic restructuring of the NBA's salary cap and collective bargaining agreement could stem the exodus.

But let's just hold on a minute.

A closer analysis of the evidence suggests the weakening U.S dollar relative to the euro had a far bigger influence on this summer's events than anything NBA commissioner David Stern and the NBA players' union did or did not do.

And a quick game of fact or fiction will help us get to the heart of the matter:

Fact or Fiction: Europe is so attractive because salaries are tax-free.

FICTION. Of course! Can you imagine any government in the world that would allow somebody to live and work in their country for 10 months, make millions of dollars and not pay taxes?

The key is, however, that to get their heads around the vastly different tax systems across Europe, players and agents there traditionally negotiate contracts in net currency (i.e., the total left in the player's hand after tax).

The team then has to cover the tax so that, in the case of Childress and his three-year, $20 million deal, Olympiacos reportedly is declaring a salary of about $32.5 million, with the Greek government pocketing the difference in income tax.

One definite perk of a Euro deal, however, is the free housing, utilities, maintenance, cars, health care and flights home that regularly come as part of a package and often escape the taxman's attention.

"I always challenge my guys to save no less than 75 percent of their total [net] salary," says agent Guy Zucker, who represents players in the NBA and across the world.

"Their expenses are limited to food, incidentals and gasoline. If a guy is smart, it's a very good living in Europe."

Of course, the other factor that the American abroad has to bear in mind is that on returning to the U.S., he must declare foreign income to the IRS and can be taxed twice -- once overseas, once at home -- depending on the tax arrangement between the two countries.

Fact or Fiction: Brandon Jennings' decision to forgo college and sign for Italian side Roma foreshadows a mass migration of high school grads to Europe.

FICTION, according to observers on both sides of the Atlantic.

Of all this summer's comings and goings, the decision by Jennings to head to the Eternal City instead of college at Arizona might be the single most surprising.

"That was very surprising, on both sides," says Ettore Messina, coach of reigning Euroleague champions CSKA Moscow.

"[Jennings] being academically ineligible [not having qualified academically when he made the decision], it makes it less of a surprise, but Roma wants to be a winning team in Italy and a competitive team in Euroleague. To see them putting a lot of hope in the hands of such a young player, this deserves special attention.

"Maybe I am wrong, but I think this is a special case, not a trend."

Messina has touched upon a key issue in the summer of 2008. One year from now, Euroleague will hand out 16 permanent licenses to teams, assuring them of a guaranteed and indefinite annual slot in the 24-team field.

Some teams -- such as Messina's CSKA -- are locks for one of the licenses; others, perhaps including Jennings' Roma, are on the bubble and need an impact year to be sure of receiving one.

In that light, the Jennings signing could be seen as a huge gamble.

But one basketball executive who has worked closely with high school players in the United States and in Europe is more scathing about Roma's decision.

"Jennings may have a great career ahead of him," the source says. "But this isn't the second coming of LeBron James or Kobe Bryant, somebody who could have come out of high school and helped any team in Europe right away.

"I'm sure Roma will have considered everything and will do everything to make this successful, but for an 18-year-old kid … to be expected to walk into a foreign country and compete against men in a different style of basketball and different style of coaching is just not realistic."

Fact or Fiction: Childress will be the first of many good American players to quit the NBA for Europe.

FACT … or FICTION, depending on how you define "many."

"I don't think there would be more than three or four European teams who could make offers like that [made to Childress]," says Toronto Raptors assistant GM Maurizio Gherardini, who is Italian.

"Interestingly, some of the best contracts being signed over the past two or three years have been with teams not even in Euroleague. [Bostjan] Nachbar has signed with Dynamo [Moscow], [Carlos] Delfino and [Jorge] Garbajosa with Khimki. Those teams aren't even in Euroleague."

The reason Russian clubs such as those are able to compete with traditionally wealthy teams in Greece and Spain has nothing to do with basketball and everything to do with the price of gas, which has fueled the burgeoning Russian economy.

"I have not been surprised by this," Zucker says, "although the escalation of salaries has perhaps been faster than expected.

"If you consider global economic factors -- the increasing price of energy and Russia having an economy so heavily dependent on that. Then, of course, the weakening dollar. Three years ago, 100,000 euros was roughly $100,000. Now, 100,000 euros is $160,000, without any other factors changing.

"I would say, generally, salaries have increased four times in three years. There are three teams in Turkey capable of paying seven-figure salaries; midlevel Russian teams are paying $800,000 a year."

In short, although that spells good news for lower-level NBA players whose options have suddenly broadened significantly, the number of potential Childress scenarios in any given summer is very limited.

Of course, that will not prevent players and agents, restricted by the NBA's strict salary structure, from courting European offers to use as a bargaining chip in the United States.

But a more interesting situation might surround NBA players with European passports or the ability to access European passports (such as Brits Luol Deng and Ben Gordon and newly German Chris Kaman).

As EU passport holders, such players can sign in EU nations such as Greece and Spain without counting against the club's limit of foreigner imports. Gordon this week admitted that he was toying with taking such an option rather than accepting a one-year tender from the Chicago Bulls worth a relatively modest $6.4 million this season.

As for the long term, as Zucker puts it: "What is really going to determine the length of this 'trend' are the greater global economic factors more than basketball."

Another factor in whether European teams will invest this heavily in NBA players in the future is how successful Childress proves to be with Olympiacos.

Although there might be no doubting his talent, there is no way of knowing how he will adapt to life in Piraeus, the port of the ancient city of Athens, or how he will cope the first time he plays against heated rivals Panathinaikos.

One former Panathinaikos player recalls playing in the game and looking at the pile of debris that had been deposited on the court by rival supporters aiming to hurt players. Among the rubbish were mobile phones and car keys. "What is your mindset," the player asked me, rhetorically, "when you want to hurt someone so bad you will throw your mobile phone or car keys at them? How do you even drive home?"

"It depends on whether these signings are being made to fit a specific design or need on the team or whether it is just a reaction, to make a big signing to get a big name to hit the marketplace," says CSKA coach Messina, who has been in the unfamiliar position of seeing his club outspent by rivals at home and in Europe at large this summer.

In short, have Olympiacos signed Childress, at least in part, just to score a point over Panathinaikos in the never-ending P.R. battle between the pair?

As for the general summer movement, Messina believes Childress is by far the most fascinating case to watch.

"The fact that Europeans are coming back doesn't mean as much as the move made by Childress," he adds. "He is one of them, one of the NBA 'family,' in a way Garbajosa and Delfino are not.

"The most interesting thing is we need to know whether the financial issue is the most important reason for him coming. Nobody can say this, only Childress. Only he can prove his desire to prove himself in Europe and compete in the Euroleague."

Fact or Fiction: Nachbar, Garbajosa, Juan Carlos Navarro, Primoz Brezec, Nenad Krstic -- Euros are heading home in droves.

FACT and FICTION. They are this summer for all the reasons outlined above.

But certain Euros have always opted to stay at home, sometimes for personal rather than financial reasons, and many have returned to Europe after brief cameos in the NBA.

"It is still a struggle to keep hold of players or bring players back [from the NBA]," Messina says. "Even if players understand they have a major role in Europe and, perhaps, only a limited role to play in the NBA. It is still tough."

To prove that point, English forward Pops Mensah-Bonsu, a Dallas Mavericks rookie in 2006-07, enjoyed a breakout season in Italy with Benetton Treviso in 2007-08 and earned an 850,000 euro ($1.32 million) offer from Spain's Badalona for the upcoming season.

Mensah-Bonsu, however, seems prepared to take less money to play in the NBA and, as of this week, was in talks with four NBA clubs after a strong showing in summer league with the Minnesota Timberwolves.

Fact or Fiction: European clubs are rolling in money.

FICTION. Events of this summer might have given that impression, but nothing could be further from the truth.

The French League recently revealed budgets for each team in the league that ranged from Le Mans at 5.63 million euros ($8.77m) to Rouen at 2.28 million euros ($3.55m).

And those figures are budgets that cover not only player salaries but also operating costs and front-office wages -- hardly extravagant amounts.

Further, this has been a turbulent summer for some of the biggest names and leagues in the European game.

Spain's ACB rightfully considers itself the second strongest national league behind the NBA, yet Madrid club Estudiantes had to be rescued from insolvency by new ownership and Akasvayu Girona has pulled out of the league because of financial problems.

Even storied Serbian team Crvena Zvezda (Red Star) Belgrade (former employers of Vlade Divac, Predrag Stojakovic and Vladimir Radmanovic among many others) has declared itself to have major money problems and doubt over its future.

The European rich might be richer than ever, but the credit crunch extends beyond American shores.

Fact or Fiction: Many American players will find the culture shock of living in Europe tough to handle.

FACT. True, there is a McDonald's on the corner in seemingly every major city in Europe, but that tells only half the story.

And the world might be getting smaller but a lot of Europe's wealthier clubs are on the very edges of the European basketball map, literally and metaphorically.

"The culture shock can be huge for Americans," Zucker says. "And that is one of the reasons these countries tend to overpay.

"That is not to hold anything against places like Russia, which is becoming a very, very dynamic country with money just pouring through it.

"Guys feel more comfortable in traditional overseas countries like Italy or Spain, but Russia is paying more now because of logistical conditions.

"If you are in Moscow or Saint Petersburg, fine. But [Spartak] Vladivostok is practically in North Korea! They played in the FIBA Europe Cup last season, and teams refused to fly there. They had to play their 'home' games in Moscow, which is a 10-hour flight. But they pay a lot of money, and that makes up for it."

Former Memphis Grizzlies forward Robert Archibald turned down NBA summer league offers in 2007 to sign a one-year deal with Azovmash Mariupol in Ukraine, another country enjoying an upturn in its economy, for a reported $1 million.

By midseason, however, both Archibald and his wife, Molly, had suffered attacks of appendicitis and been medevaced back to the United States for surgery. Archibald went on to win the league's MVP award but spent the second half of the season a virtual recluse in the industrial port city while his wife remained in the US.

"There is not a dollar amount out there that would have got me back to the Ukraine," Archibald says. "Nothing against any people there, but the experience I had there, some of the things that happened to me, that's not how I want to live my life."

Of course, in this summer of Euro affluence, Archibald's story has a happy ending. The New Orleans Hornets were interested in having him in summer league but made no guarantees, leaving the 6-10 Scotsman to sign a two-year deal with Unicaja Malaga in Spain for 850,000 euros ($1.32m) a season.

Malaga is, like Mariupol, a coastal town, but this one is on the Mediterranean and is frequented by Europe's multimillionaires with their entourages and yachts.

Fact or Fiction: The collective bargaining agreement needs a drastic overhaul to "save" the NBA.

FICTION. If it ain't broke, don't fix it is the attitude of one NBA GM, who requests anonymity on such a politically delicate topic.

"The strength of the NBA is the system," he says. "You don't want to change that system and run the risk of it all falling apart. But I do think teams in future are going to be more and more concerned and will pursue their free agents more aggressively because they know international clubs could be out there making interesting proposals."

Nevertheless, even if the CBA is off-limits, this summer's Euro antics have illustrated one problem for players under current NBA regulations.

"This summer has exposed the fact that restricted free agency is barely free agency," agent Zucker says. "Josh Smith does not get a single offer sheet; Andre Iguodala gets no offers. Nobody offers them a contract because they know it is going to be matched.

"That's not free agency. Guys get frustrated and feel there are no alternatives. What's your leverage? You are a free agent, and you get no offers. It was only a matter of time before people started looking for alternatives."

Fact or Fiction: The real problem facing NBA teams is the rookie salary cap as it applies to first-round draft picks.

FACT. And it is simple mathematics -- just ask the San Antonio Spurs and Tiago Splitter.

Even ignoring the fact that many leading young Euros have prohibitive buyouts in their contracts, the majority of which must be paid by the player himself, if a Euro has been taken in the first round, his NBA pay scale is set in stone and, therefore, problematic.

Not so in Europe, where anything goes. Splitter, a potentially brilliant Brazilian forward, was taken 28th in the first round by the Spurs in 2007 but -- despite being expected in Texas this summer -- re-signed for two years with leading Spanish club Tau Ceramica, reportedly for eight times what San Antonio could pay him.

The moral of the story? If you're a promising young Euro, hope you get drafted in the second round, which carries with it no salary scale, and start a bidding war between your Euro club and your NBA team.

Fact or Fiction: The day is not far away when the real elite Europeans (think Pau Gasol, Dirk Nowitzki) will have the option of staying at home and making as much money as they can in the NBA.

FICTION … for now. As for the future? Global economists probably can answer that question more accurately than GMs or agents.

But it's a fact that since its inception in 2000, the Euroleague has enjoyed phenomenal growth in every area -- attendance, income, marketing, television, sponsorship -- and there is no sign of that boom drying up any time soon.

"I think Euroleague still has a lot of work to do," says Euroleague CEO Jordi Bertomeu when asked to envision a day when Nowitzki and Gasol are playing in his league.

"The NBA offers players multimillion-dollar contracts, like Gilbert Arenas' $111 million contract. I think it's hard to imagine a Euroleague club reaching those kinds of numbers. But I wouldn't rule it out … maybe one day!"

Ian Whittell covers basketball for The Times of London.