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Barcelona’s Unintended Prophet heralds the collapse of the Spanish Empire

Did Sandro Rosell unintentionally signal the hidden fear in Spanish football?

Mike Urbanski

Cesc is leaving.  Or Cesc isn’t leaving.  Barcelona say they can only pay £30m for Captain Fabulous.  Arsenal are said to be demanding £80m.  Cesc and Arsene have sat down and discussed his potential transfer to Barcelona.  Or they haven’t sat down because Le Boss was actually away on holiday.

Barcelona are skint. Or Barcelona are flush.  Barcelona are carrying some £420m of debt.  Or Barcelona have debt similar in scope to Arsenal and are servicing it easily.  Even a thorough examination of Barca’s accounts leads to the conclusion that all 4 presumptions are in some way accurate.

Somewhere amongst all this chaff are kernels of truth.  While I lay no claim to insider knowledge on whether or not Cesc will actually leave or what Barca’s current debt level is, I can say with some certainty that Spain, as a national economy, are staring down the same double barrelled shotgun that Greece are facing.  And Sandro Rosell may just have let the most important footballing cat out of the bag without realizing it.

Labelling his club’s debt level “Stratospheric” , Sandro Rosell put a rather emphatic damper on Barcelona’s financial ability to acquire the services of Cesc Fabregas.  While we’re all used to hearing unimaginable numbers concerning footballing debt, what we’re not used to hearing is a candidate for the Presidency of one of the largest football clubs in the world stating so clearly just how much of a threat that debt is to the club.

An interesting tactic for the candidate, no?  Hey voters of Barcelona – my platform for the Presidency is this:  “We Can’t Afford Cesc!”  Vote for me!

My suspicion though, is that the warning sounded by Rosell has less to do with the current silly season shenanigans in Barcelona than it does with a much broader fear.  The salad days of easy lines of credit and notes that never get called in at more-than-willing Spanish banks are about to come to a screeching halt.

They’re called PIGS.  Portugal, Italy, Greece & Spain.  The four countries that could bring down the Euro.  Literally.  Greece is already suffering from civil unrest at the looming prospect of either an IMF or EU intervention.  And if you think the Eurozone is having problems over Greek debt, just wait til the EU or IMF have to step in and bail out a Spanish economy that is several orders of magnitude larger than Greece’s.

Here’s a newsflash: Neither the IMF nor the EU give one toss about football.  Not as it concerns national economies, and definitely not when it concerns their money.  If you’ve never been to a country that is under IMF austerity measures and the full blown horrors of Keynesian economics, let me give you a little preview:

Whatever the unemployment rate was before the IMF stepped in, expect it to increase significantly after they arrive.  Expect taxes to increase across the board.  Expect social and public services to be cut to the absolute minimum.  Expect inflation and interest rate increases.  Expect a large portion of the GDP to leave the country in question as it struggles to meet IMF repayment covenants.

Expect both a great restriction in available credit and humourless IMF debt collectors to start paying visits to deadbeat bill payers.  If you thought the Glazers or Hicks & Gillett were good at asset stripping, you’ve never seen the IMF strip out a country that owes them money.

The IMF and EU are not sugar daddies and they will definitely want their money back.  With interest.  Germany and France are not willingly going to fund an EU bailout tranche, hand over billions of Euros to the Spanish government and allow that money to be lent to football teams so they can buy new players.

And while England is resisting any such involvement in a proposed EU bailout fund, eventually they’ll be swung ’round to chipping in.  And where does this EU money come from to bail out Spain?  It comes from you, dear reader, through taxes.  Do Gooners want to fund, personally, the purchase of Cesc Fabregas by Barcelona?  How about United supporters chipping in to that fund only to have a Spanish bank lend to Real Madrid so they can buy Wayne Rooney?  Thought so.  Not gonna happen.

So what does this mean for Spanish football?  Well, Sandro Rosell knows what’s coming.  Spanish football lives on bank funding to buy new players.  Real Madrid and Barcelona make a few phone calls and – viola! – they have an extra £45m to buy that shiny new midfielder who will help them win trophies.  The threat to this, however, is not the current amount of debt that Spanish teams may be carrying, but that continued borrowing to afford new players will soon come to an end.  And shortly after that end comes, so will the bill collectors, with their higher interest rates, on whatever notes are outstanding at those oh-so-eager Spanish banks.

The next European domino to fall will be Spain.  Sandro Rosell may not win the Presidency of Barcelona, but in the future should be looked on as an unintended prophet for sounding the alarm bell on the “borrowed-with-interest” financial might of Spanish football.

——————————-

A parallel time, a century ago

Untold Arsenal – no one tells it like this site does

But you still need something to read on holiday

30 comments to Barcelona’s Unintended Prophet heralds the collapse of the Spanish Empire

  • Tobias

    Extremely good analysis on the world and how it effets football.

    This also clears out the Arsené way of running a football club.
    The crisis is hitting England aswell, and Arsenal will/is be ready for it.

    Another great example on how Arsené is the only man for the job.

    I love this Blog !

  • leave-cesc-alone

    F.C. Barcelona, for all their beautiful and attacking play, can F-OFF! Can’t wait to see the day when all these clubs(Man Utd, Real Madrid, Barcelona) that borrow millions each year to buy that “shiny new player” come crashing down to the earth. THE BIGGER THEY ARE THE HARDER THEY FALL!

    Long Live Arsenal!!!

  • WalterBroeckx

    Great article Mike.
    In fact it would be great that Spain would be the next to fall. Not that I wish the Spanjards any harm or trouble, but to teach a lesson to those big spenders and troublemakers by tapping up players under contract, would be a nice thing.
    And good to see the Arsenal ready for anything that would happen for the future.
    My grandchildren will be watching an Arsenal at the top, not sure about some other clubs

  • Phil

    Interesting read Mike, good link between football and the current crisis.
    I have to say I think you are a little too doomsday about Spain though, I don’t think they’re in the same boat as Greece just yet, and given the austerity measures unveiled I find it unlikely that they will be. They’ll undergo a long and hard correction (that they needed badly, truth be told) but I don’t see them getting shut out of credit markets any time soon.

  • Dino Gunners

    Good analysis, it was a fair objective view of a possible reason why the Barca president might be more fiscally conscious.

    One minor quibble, all the symptoms you mention imply a recession and thus high unemployment, credit tightening etc. When the economy is in such nature, inflation is inherently low because of the lack of money in the economy. Could you please take that line out.

  • bruno dante

    it is quite amazing how all the worlds so called best players are heading to just two clubs in spain at the moment. Both of whom have huge debt. I do wonder if the fans at barce care about debt when they will be spending next season watching fabregas, villa, messi, xavi, iniesta, pedro, ibra…

    Saying that the two big teams in spain managed 99 and 96 points respectively this season i think. If football keeps going this way in spain they may as well just have a two team league and get them to play each other every week.

    Lets hope we avoid the spanish and english teams next year

    And

  • Phil

    Dino: stagflation. You are right in the standard macroeconomic circumstance, but we’re in exceptional times. The strong depreciations of the Euro and Pound in particular push up fuel prices (remember oil is priced in dollars) as well as import prices going up (and the UK’s trade deficit certainly means imported inflation is a risk), quantitive easing and the corresponding growth in the money supply (hasn’t seemed to bite, I’ll give you that). Tax rises may decrease consumption and therefore “demand pull” inflation, but will cause significant “cost push” inflation.

  • shane

    It has long been said that Spain was to become somewhat of an Economic strenght over the years. Yet Franco’s management of he economy left it in somewhat of a dire situation. Yet it appeas that this is something that has only hit the Mediterannean, Ireland too suffered a great economic down turn. I think this is a ogod article. And i really enjoy articles which analyse economic situations of clubs. Hats off to untold.

  • Abhishek Kumar

    One thing that also needs to be added is the austerity measures introduced in Spain. Although I dont know about the real passion of fans in Spain but certainly people would not like football clubs to be given so much in credit and spend when common man is asked to fork out money.

    And considering that Liga has 20 teams, we can be sure that fans of other clubs must not be happy about it. So even would be more vocal in their opposition.

  • Rhys Jaggar

    Interesting then that Mourinho indicates in today’s press that he intends winning things at Real, broadly, with the current squad of players.

    The funniest thing, actually, was what Mourinho wrote about Ronaldo. Clearly, in a swipe to my spoof lawyers’ letter to Tony at this site a few days ago, he thought the ‘right winger’ I was referring to was Ronaldo, due to his association with Paris Hilton! He also mentioned the right to buy Ferraris, which was also funny as Ronaldo pranged his in Manchester soon after I wrote a spoof dressing down by Brian Clough to Adepaymore, which included the words ‘You don’t need a Ferrari to be a professional footballer’!

    The funniest thing of all was this: I was not referring to Ronaldo at all!!!!

  • MoMONEY

    I’m currently studying economics in university and I swear I learn more on this blog than in any class! Great article

  • ISSAC

    Sorry to say that guys, our captain is on his way out. This is a link to an Interview of his Dad. I suspect there is a truth in that. We should let him and get at least 50 millions for him. The team cannot be held to ransom. I have been quite a loyal fan of this site, but we have to face the reality. Hard to get a team stronger when we keep on losing players. But if a player wants to leave we should just let him go as I do not see what else we could do here. This link is in French but you can use a google or yahoo translation tool.
    I am very upset but I respect his decision.

    http://www.lequipe.fr/Football/breves2010/20100525_104758_-fabregas-veut-aller-au-barca.html

  • Terence mcGovern

    So spanish translated into french and then re-translated into english…..Perhaps we should just stay on topic instead eh.

    Great article Mike.
    Desi, the IMF always increase interest rates because ethey have carte blanche to do so. Inflation naturally follows. Their main negative effect is to divert funds from social programmes into their own coffers and to assist the privatisation of public utilities generally to foreign corporate bodies.

    Given that most of the borrowed sums are to prop up banks one can see the immense social injustice that demonstrates.
    Rather depressing really. I am going to cheer myself up with a round of golf at Adare Manor on this beautiful day

  • Gooner Frank

    Cesc will go.Deep down we all know it

    At the moment both Arsenal and Barca are playing a game of bluff.We want £80m they want to pay £30m. A compromise will happen at around £45-£50m.Or £30m and two players thrown in Ya Ya being one

    But Cesc will go.Wenger will not want to keep an unhappy player like Henry was in his final season with us when he could have joined Barc in the previous summer

  • walter

    Would be interesting to find out if that Balague guy also writes for l’equipe. I don’t know l’equipe that well but it could be another rewrite of the story’s of last week?

    In fact his dad contradicts himself in a way telling that the negotations would be long and hard but also telling Cesc want’s it out of the way before the WC.

    So Arsenal just have to do nothing in fact and wait for the WC to start. 😉

  • hartwick89

    So in fact if what you are saying is true why aren’t all the other la liga teams entitled to the extravagent loans received by the big two?
    You also mention Keynsian Economics help me connect the dots… This term has been thrown around recently and I am not sure it is properly placed…
    Lastly, again an old saying states “Pay what is due” and you will be free. It is easy to point fingers at teams, countries but we need to look in the mirror.
    Debt is a shackling thing….

  • mahoney

    I’m sick and tired of this jargon that Wenger …

    This comment has been cut as it had nothing much to do with the post, and was also an attack on Wenger. The site has the editorial policy that anti-Wengerian pieces will be published, but they do have to take into account the broad issues laid down in the “Coherent Argument” post recently.

  • walter

    Hartwick I think that the fact that it is just those two clubs that get the big loanes from the banks is a result of the history in Spain.
    The fact that Barcelona was the only place in Catalunya where Catalans could speak their own language in the last century has made them more than just a football club. I think in fact the ‘mas que une equipe” (more than just a club) hints at that history.
    So you have the big political/cultural/language frontierline between the central regime (Real Mad) and the Catalan dream (Barcelona). Thus banks with roots in Catalunya will fund Barca almost unlimited and the other way round for the banks more based in Madrid.

    It is more than just two clubs competing. It is the Catalan regio who still want to separate from Spain in the future against the central regime from Madrid.
    But I don’t know if that line now still is as strict to be honest.

    But as a result if you are a club like let’s say Almeria in the south of Spain and far away from Barcelona and Madrid you are just a team that is good enough to hand the 3 points over when you play them. If they could they would throw those little clubs out of La Liga and only play each other every weekend.

    I must admit that for a long time I felt a lot of sympathy for the Catalans. I have been there on holiday a lot in the past 30 years and those where the days that hanging out a Catalan flag was a bold statement. Now it is natural and no one notices it anymore. But my sympathy is going down very rapidly when I see the way they behave the last months.
    I even wish Mourinho every succes in all the Spanis competitions. My God, how low can I sink… 😉

  • walter

    If Cesc goes back to Catalunya, my holiday this summer that has already been booked, will be my last in that part of Spain. I will not give my money to those ******** anymore. Now, that will hold them back. 😉

    Goonerfrank, I think there is a difference between TH and Cesc. TH was running out of time (and steam). Cesc has some 8 years in front of him (his best years).

    As long as he doesn’t say it in the open on arsenal.com I think it is just his surrounding doing to talk in case he stays so he can say: “Hey, I never said I wanted to leave this summer it was the others. I was to busy recovering from injury to say something.”

    He should have looked at the length of his contract in stead of looking at the wages part.

  • mahoney

    What stupidity is this? MY comment was cut because it attacked wenger? Mate are you on drugs or does wenger pay u to run this site? Whether u like it or not my comments were perfectly right and as u have no answer all you can do is block my comment. Pathetic. Carry on being the sheep its all cosy like that eh.

    —-

    I will try and explain this as carefully as I can. This site is a pro-Wenger site. It says so in big letters on the home page.

    Also a couple of days back, and indeed listed in big letters on the home page at the time your piece was submitted, was an article saying that we had debated the anti-Wenger approach so often and the same points of view had been written up so often, it was all getting rather dull. Anti-Wenger pieces will be accepted, but they have to answer some of the key points that have been made many times in articles on this site. The article is still listed on the home page.

    Finally, the prime reason your post was stopped was because it had nothing whatsoever to do with the article on which it was supposedly commenting. Simple courtesy suggests that one should read an article and comment on it, rather than go off and talk about something utterly different.

    But perhaps overall the biggest difference between yourself, and those of us who write and read Untold Arsenal, is that while we try to behave with courtesy and the normal decencies of civilised life, as soon as you don’t get your way you suggest we are on drugs.

    I think that is really quite a good commentary on the situation.

  • Phil

    Hartwick: Keynesian economics is basically this (in a nutshell):

    A recession is brought about by insufficient demand. Insufficient demand means people get laid off, lowering national income. Lower national income means less demand… and so on in a vicious circle.

    To solve this, Keynes basically says that, as the insufficient demand is due to reduced private consumption (say for instance because a bunch of banks fail, so people save money in light of an uncertain future) therefore governments have to spend more to take up the slack until the public decide to spend again.

    Literally just wrote an exam essay on that 😛

  • mahoney

    Fair enough its pro wenger but you cant have it all pro matey. You need to wake up to the real world too, on the second note, I am new here, and did not know we had to make sure we commented on the article. Though it was anything arsenal related. These are called opinions, you dont need to have a encyclopaedia or reference books as you suggest to back up arguments, its banter amongst gooners who want whats best for the club. A difference of opinion is natural and you are trying to block people because of their opinions? seems like a dictatorship around here

    ——–

    I think it seems like a dictatorship to you, but it seems like a democracy to most of us.

    The web is full of anti-Wenger sites, and indeed we even list some of them in the blogroll on our home page. This site was set up because there were hardly any pro-Wenger sites, and the arguments of those who are pro-Wenger were always shouted down on the anti-Wenger sites.

    We have spent a long time (over 2 years) allowing all views to be expressed, but we were then attacked by a group of people who used multiple email addresses to make it look as if they were numerous.

    So we evolved simple rules which are clearly posted on the site. If you go to the home page and take a moment to read you will see the articles.

    Thus all we are trying to do is provide an area where people who are generally pro-Wenger can debate issues.

    I would love to have a balanced site with both sides able to put their views, but when we have tried that, the site has been abused and attacked.

  • mahoney

    If that is the case then surely you as the editor can remove those posts? Why ban people who have valid opinions, just because they are not happy with the management at AFC? If it is true democracy then you should allow people to post their views, and if it seems like they are abusing the site then you can easily remove them. But I am sure they must be in the minority.

    —-

    The consensus built on this site is that to argue for or against a manager you need to take into account a range of complex issues and despite the fact that this site has repeatedly put out this message, we are bombarded with emails that reduce the argument to simplistic points. If you have read the articles I have mentioned you will see what I mean.

    Further, I look after the site, but I also have a full time job, and although I can take the odd moment some days (as today) to check things, often I am away from my computer for much of the day. In such cases I would either be leaving up stuff that was irrelevant to our blog for a day or so before removing it, or I would be holding up all posters.

    You must hold in mind the fact that this is not set up as a site to debate is Wenger good or not – there are 100s of sites doing this. It is set up to explore the complexity of the economics and politics of football and how they are affecting what is happening within Arsenal FC. So the debate you seek to introduce is simply not relevant to this site. Likewise, the Woolwich Arsenal site that we also run is about historic issues relating to Arsenal, and other posts on different subjects are blocked.

    I would add that we have around a quarter of a million readers a month, and even if 50,000 of those come here by mistake, thinking that we are debating other issues, that is still a lot of people who feel that this site covers ground that other sites don’t in a way that other sites don’t.

    It is very similar to the fact that on thursday nights I go to a night club where I can jive. If someone says, why can’t you play drum and bass music, the answer is no, because it is a jive club and plays jive music. This is a web site that explores the economics and politics of football, and through that supports Wenger who, also, in his work, takes into account the political and economic reality.

    Tony

  • Gooner Frank

    Our board will not turn down an offer of £50m for Cesc.With our debt on the stadium it would be madness.
    If we were run by an Abramovich we could but cant.
    Cesc needs success but he cant see it coming to the club in the near future.The beatings by Chelsea and Man utd at home and Barcelona in the CL showed that.We are not 1 or 2 players behind these clubs but 5 or 6.And Cesc can see Wenger is not going to bring 5-6 quality players in.

  • Ian Trevett

    Mike – superb article and very thought-provoking.

    i wrote a piece about why this will be our last painful summer as our revenues from the new stadium flow in. I suggested that Madrid and barca would be the only clubs that we should worry about in the future when it comes to losing payers, and only because of their prestige. If your analysis is right then there will be no European clubs that will be able to swipe our players.

  • Finsbury

    Stock markets plunge as the PIGS are prepared for the abattoir.

    Barca’s board resign as usual preperation for an election.

    Normal payment plans such as those which still exist for Hleb and Henry must be a little compromised at this moment, or hard to give a guarantee upon, or even propose (without a board)?

    Who exactly are AFC meant to be negotiating with?

    Laporta’s shadow?

  • Marc

    Interesting piece Mike and I’m sure I read earlier that the Spanish Central Bank has had to step in and rescue a Regional Bank from collapse, only the second time it has happened.

    As for Dino Gunners comment @ 9.27 while I’m sure that Phil can give a more knowledgeable answer if you are looking for countries with collapsed economies and inflation (or even hyper inflation) please look at Germany before the Nazi party seized control in the early 1930’s and more recently Zimbabwe. Then there is the argument that even without IMF intervention one way for a government to reduce National Debt is to actually induce inflation, the debt is effectively devalued. Not that I’m suggesting either is a good solution.

  • shotta-gunna

    Mike – The Swiss Rambler blog wrote a piece recently explaining how Barca can afford Cesc at at say 50 million pounds; simply put, they have at least 30% greater turnover than Arsenal (roughly 200 million vs 300 million) due primarily to their ability to cut their own tv deals at the expense of the rest of clubs in La Liga, except Real Mad. Hence their ability to make major gambles like Ibra and the Serbian defender last summer. But if the economy and banks continue to nosedive at the current rate they and the rest of La Liga could be in a world of hurt. With Spanish Clubs like Mallorca already going into Administration, it could even force the FA to demand a more equal divvy of the tv money. Don’t think it is improbable; if you recall, last year the Argentinian government took over the tv rights for the Argentinean League so the clubs had money to operate.
    Sooner or later the Barca scum are going to be unable to float money like confetti at every player they fancy. Serves them right.

  • Paul

    Interesting article Tony. One could also point out that Barca still owe us quite a chunk for Thierry and Hleb still.

    As far as your editorial policy, I quite agree. There are enough sites such as Le Grove and ANR with their rabid anti Wenger stance, and they have long censored anyone who puts out an opposing view. So I just stopped visiting them, saved many wasted hours and been a lot happier as a result

  • AFC1974

    First time poster here – Great article. Looks like the chickens are coming home to roost.

    On the subject of Arsene, Arsenal, player, servant or people in general, I think everyone deserves to start with respect. This can be eroded of course. Arsene is cleary head and shoulders above any manager I can recall at Arsenal, however he is human. I hope we would not turn a blind eye to an error. Pro somebody regardless is as futile as slagging somebody regardless.

    Sorry, didn’t mean to preach. It’s a blooming good site and it’s yours. Keep up the good work.