Dalglish replaced Keegan, then won Liverpool the European Cup at Wembley

Kevin Keegan went to Hamburg in the summer of 1977 for £500,000. On 10 August Bob Paisley signed his replacement. Kenny Dalglish came from Celtic for £440,000, a British record; the old one was £350,000, paid by Everton for Bob Latchford. He was 26 and a Scotland international. One report at the time described him as "possibly the only player in Britain with the basic style to fill the gap left by the departure of Kevin Keegan".

Celtic had not wanted to sell. "If Kenny had wanted to stay at Celtic Park I would have turned down any amount of money offered for him," said their manager, Jock Stein. "Now where do I find another player like Dalglish?" Dalglish said: "This really was the offer I could not refuse. There was no way I could turn down such a fabulous offer although I am very sad to be leaving Celtic."

He made his debut three days later in the Charity Shield against Manchester United at Wembley, and scored 31 goals in all competitions that season, 20 of them in the league. In January 1978 Paisley also bought Graeme Souness from Middlesbrough.

Keegan comes back

As European champions Liverpool played Hamburg for the Super Cup, and Keegan was in the Hamburg side. Before the first leg he said Liverpool were "tired physically and mentally", and of his own move: "I would probably have lost the edge if I had stayed."

It finished 1–1 in Hamburg on 22 November. At Anfield on 6 December Liverpool won 6–0. Terry McDermott scored a hat-trick, and Phil Thompson, David Fairclough and Dalglish got the others. Afterwards Keegan said: "There were no cracks and they look as strong, if not stronger, than they ever were."

The defence

As holders Liverpool had a bye in the first round of the European Cup. In the second round they beat Dynamo Dresden 5–1 at Anfield and lost 2–1 in Dresden. The quarter-final took them to Benfica, and on 1 March 1978 at the Estádio da Luz they came from a goal down to win 2–1: Nené scored for Benfica, and Jimmy Case, with a direct free-kick, and Emlyn Hughes replied. The second leg at Anfield was played in a snowstorm. Liverpool won 4–1, with goals from Ian Callaghan, Dalglish, McDermott and Phil Neal.

The semi-final was a rematch with Borussia Mönchengladbach, coached by Udo Lattek, with Berti Vogts, Rainer Bonhof and Jupp Heynckes in their side. In Germany on 29 March Gladbach won 2–1. Wilfried Hannes and Bonhof scored for them and David Johnson for Liverpool. At Anfield on 12 April Liverpool won 3–0. Ray Kennedy scored in the sixth minute, Dalglish before half-time and Case after it.

At home the season belonged to someone else. Nottingham Forest, promoted the year before, won the league by seven points from Liverpool, and beat them in the League Cup final too, 1–0 in a replay at Old Trafford after a goalless draw at Wembley.

Brugge again

The other finalists were Club Brugge. Liverpool had beaten them in the 1976 UEFA Cup final, 3–2 at Anfield and 1–1 in Bruges. Their coach was Ernst Happel. On the way to Wembley they had knocked out Panathinaikos, Atlético Madrid and Juventus.

About a week before the final, Tommy Smith, who had scored in Rome, dropped a pickaxe on his foot and broke a toe. He had been due to play in a reserve game to prove his fitness for the final, and instead his leg went into plaster up to the knee. "I am so sick I don't know what to say," he told the Daily Mail. Johnson was out too, with knee ligament damage.

Wembley

The final was played on 10 May 1978 in front of 92,500. Liverpool's team was Ray Clemence, Neal, Thompson, Alan Hansen, Ray Kennedy, Hughes, Dalglish, Case, Fairclough, McDermott and Souness. There were five changes from the team that started in Rome.

Brugge marked tightly and played the offside trap. Liverpool had chances through Case, Kennedy, Hansen and Fairclough, and it was goalless at half-time.

The goal came after 64 minutes. Souness took control of a loose clearance and passed to Dalglish on the right. With Birger Jensen coming out at him, Dalglish chipped the ball over the goalkeeper from a tight angle. Late on Brugge came close to an equaliser, when Jan Sørensen's shot was cleared off the line by Thompson. Liverpool won 1–0.

They were the first British club to win the European Cup two years running. Paisley was not impressed by the opposition. "It takes two teams to make a game into a spectacle," he said, "and Bruges only seemed to be concerned with keeping the score down." Happel had his own complaint. "Liverpool seemed only a shadow of the side we played in the UEFA Cup final two seasons ago."

Forest, as English champions, would be in the European Cup the following season as well.