By Tony Attwood
It is a story that has appeared on Untold so many times that I can imagine that everyone is bored stiff with it.
It is a story that has had many people saying “it will never happen” because “Real Madrid and Barcelona” are far too powerful to face investigation from something as irrelevant to football as the European Commission.
But lo and behold. Some two years after we first featured the story, and four years after the first Untold Tale about the utter financial disaster area that is Spanish football, we are getting there.
Seven Spanish clubs are to be investigated by the Commission over alleged illegal state aid. These clubs are: Osasuna, Athletic Bilbao, Valencia, Elche, Hercules, Real Madrid and Barcelona.
Ok you know who that lot are. But what of the European Commission? The BBC helps us out here with its definition. It is “the executive body of the European Union responsible for proposing legislation, implementing decisions, upholding the Union’s treaties and day-to-day running of the EU.”
So now you know.
Supporters Direct are taking an active interest too. As they have recently reminded us, until the last decade of the 20th century, clubs in Spain were largely member owned.
Now this is not to be confused with member ownership in Germany which is a GOOD THING. Member ownership in Spain is BAD THING. For in Spain the member ownership model took a different turn and led to the clubs being totally in debt – rather like the country’s banks and businesses in the 21st century.
The League failed to do anything or regulate anything – and so eventually the clubs were converted into Sporting Limited Companies, except for Real Madrid, Barcelona, Osasuna and Athletic Bilbao who were left free to take on even bigger debts.
One of the big problems was that local authorities have tended to help their clubs, because of the link between the club and the area – the failure of the club would be seen as a failure of the region or city, and so local pride would not allow that.
But that kind of support by a regional authority of a loss making enterprise is most certainly not on, under EU rules.
I think a lot of people generally agree that football in Spain is utterly unsustainable because of what happened in the 1990s. But of course not everyone welcomes change. As foreign minister Jose Manuel Garcia Margallo said, “The government will fight to defend Spanish clubs because they’re also part of the Spanish brand.” Well, yes, it would, wouldn’t it.
Not quite clear about the Spanish brand though.
Barcelona, Real Madrid, Osasuna and Athletic Bilbao are accused of contravening European Union rules because they are still owned by their members and had benefited from favourable tax treatment. Real Madrid are also under investigation for their infamous land deal in which they swapped land with the local council.
Valencia, Elche and Hercules are being investigated because of help from the regional government in terms of loans and bank guarantees.
Excluded from the list is Málaga who got so muddled last year that they were selling players at discount prices to try and escape from the fact that they couldn’t pay salaries. But they are now also excluded from European competition.
Meanwhile the Financial Times recently estimated that the debts of Spain’s clubs total almost €4bn. And as a result of this 18 of the top teams have gone into administration in the last four years.
The clubs are now being forced to pay the taxes they have avoided for years, and pay off debts, and stop future overspending. Which is why Atlético Madrid sold Falcao, to Monaco, Soldado to the Tiny Totts, and Sevilla sold Navas and Negredo, to Manchester City.
All of which sounds sensible, until you look under the covers. As the Independent reported yesterday, Atletico Madrid have a debt of around €180m. Although they sold Falcao €60m they will see only a fraction of the money because they only part-owned him and anything they do get will go to paying unpaid tax bills.
Just to show what it is really getting to be like in Spain, Betis have cleared much of their debt. So they are now free to buy again. And they bought Cedric Mabwati from second division Numancia, for what it says in his buy out clause: €1.20. (And yes, that full stop is in the right place. The price of a cup of coffee).
Excluding Real Mad and Barcelona, Spanish first division teams have now cut their losses from €200m in 2011/12 to under €40m for 2012/13. The top two clubs seem immune, but of course they can’t be. We saw the cracks at Barce while Henry was there, and the players didn’t get paid one month. When the links between Real Mad and the local authority, and Real Mad and their bank, are unraveled, all hell will break lose.
So the double attack on Real Mad in terms of its dealing with the local authority, and the investigation into state aid, and the inclusion of Barcelona in the state aid issue (vis a vis aid from the municipal government) threatens the giants for the first time.
It could get quite interesting. (Oh yes, and even if you didn’t read it here first, you did read it here quite a long time ago).
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““it will never happen” because “Real Madrid and Barcelona” are far too powerful to face investigation from something as irrelevant to football as the European Commission.”
Tony,
My prediction: these principles will not trump the overall need of the Spanish economy and the EU’s interest in the restoration of a viable Spanish economy. The investigations will result in some level of reform, perhaps, but will not put those sides out of business (i.e., push them into utter bankruptcy). Those two are “the Spanish brand” and mean more nation-wide and to international football as a business than their practices. Politics will trump economics and a negotiation will settle all accounts. Put another way, it’s still two years since you predicted their (then it appeared impending) downfall. To me, I’d enjoy seeing an all-out fire sale and have us scoop up their bargain quality (as long as the transactions didn’t further enrich a certain son of a dein). But I’ll wager with anyone that, at the end of the day, they will remain (for political reasons) slap-on-the-wrist too big to fail.
So presumably West Ham will be made to pay a commercial price for the Olympic Stadium then!!!
Don’t Barcelona still owe Arsenal quite a few quid? Is it shown on our books?
Gf60,
Are anyone’s books open to the public? For equal frustration, why not re-pose your question to Dein The Lesser. As the uber-agent, he benefited mo$t from the various recent AFC/Barca transactions in question (Cesc, Song, even TH).
Agree with Bob, this pair are too big to get into that much trouble…however some say that Germany is the most powerful nation in the EU – maybe some vested interests could come in here? Protecting their well run clubs…and ensuring their success? Whatever actually happens, do not think practices of these two in the past will be tolerated in the future. Dont think the citizens of Europe will take kindly to a country needing rescue packages giving tax breaks and other gifts to giant clubs.
The original debt for Henry, Hleb, Overmars, Petit had been cleared, however I believe that Barcelona still has a final payment for Alex Song to make.
Barcelona does not pay Football salaries on a monthly basis, but on a semi-annual basis: twice a year. The problem is that sometimes when somebody mistime payments and banks suddenly play hardball with loans that can lead to cashflow issues. That is exactly what happen to them a couple of years ago. They could not pay the tax and the salary, because the sponsor money was not due yet. They had to negotiate with the players for a 2 months delay and extra interest.
The problem with the Spanish Football is that it was badly managed and full of very dodgy characters. It was viewed as a get rich and grab notoriety without doing anything scheme. La Liga is unhealthy, but it is even worse in the Secunda and lower league. Corruption is rife. Mind you some bribes are legal. It is legal in Spain for a club to promise and give bonuses to players of another team if they beat their competitor. Imagine toward the end of the season, you are a player for a club with nothing at risk (relegation nor promotion). You have not been paid by your club for the last six months. Somebody offers you extra money to beat your next opponent because that will help them being promoted. Of course you will be extra motivated. Worse, you have to play the generous benefactor them after, I doubt that your commitment will be the same.
I believe that without radical change, the Spanish football will be royally screwed for years. It has already started.
Because of the DTN and its ample power, French clubs tends to be better run than in Spain. However because France is not a football mad country, outside of PSG (because of Qatar), Monaco (Russian Oligarch), Lens (in second division but will be up with the Kazakh Oligarch) none of the clubs are rich. Even Marseilles owned by Adidas owner’s widow has been told to run within a budget.
Italy is in a middle of huge crisis in term of football club. Corruption, Match fixing, Racism make them very unattractive except for the 4 top clubs.
That is exactly why so many players are now leaving Spain and joining English and German clubs. With Russia, Israel, Cyprus becoming viable alternative to second tier footballer, in five years La Liga could well be in the state that the Calcio is currently.
@Valentin,
What an appalling state of affairs you have revealed about Spanish football. Salaries paid twice a year instead of monthly and the practice of paying bonuses to players of rival teams, is mindboggling.
While our own big business that is football is not without corruption, I can’t help feeling thankful for the English Channel. Now all we have to do is get out of the EU.
@Nicky,
If you think that the same stupid thing do not take place in lower league in UK, you are deluded.
Look at lower league game, results toward the end of season throw a lot of improbable scores. Sometimes, it is just the fact that players do not want to get injured. Sometimes, it is just because they know that some result could jeopardize their move or the move of one of their mates. Sometimes, it is …
The principle of paying salaries twice a year, is not necessarily wrong. Done well, that can allows clubs to better align their outgoings with their ingoings. Quite often the TV revenue is paid in instalments. Even in country with a central TV revenue deal, it is not unusual to pay teams twice a year rather than everything upfront.
The problem is when the outs are due before the ins: Cashflow crisis. That lead to short term loans. Short term loans that the local banks may not and/or cannot provide. Especially not without further guarantee. That was Barcelona’s problem.
What I describe is just the tip of the iceberg. There is another storm coming because of Mr PIAT regarding players’ contract and players’ transfer. That’s the lawyer who represented Jacques Bossman. If he win his next ruling, the concept of transfer and long term contract will be gone. According to him, players should be able to cancel their contract by paying a flat realistic fee (no more the €200M Messi release clause) and the remaining of their salary dues to the club.
Unless the EU pass a special law, there is good reason to think that he will win. That could cause carnage.
Every year, team could bid for a player by just promising to pay an even more extravagant salary. Imagine Messi or Christiano Ronaldo playing one year for Barcelona, then the next for Real Madrid, then for Monaco then for PSG, then back to Barcelona. Simply because their agent tell them to renegotiate a bigger salary every year.
Atletico Madrid has a massive debt?
Diego Costa to Arsenal ?
I hear , he has a 30 M release clause and he’s on low wages. 30M + 1Euro …. anyone?
ok, we know that is going to take time to come to any judgement. but does anyone know what are the likely punishments these clubs will face. my guess is a couple of quid fine? i really hope this is not the case.
@Valentin,
Of course I am deluded and do you know why?
It’s because I can go back in memory for nearly 90 years, when professional football was a sporting contest between two sides on grass, each trying to win 2 points. The corruptive influence of big business hadn’t yet arrived. Lawyers and accountants had no place in the sport.
I am sorry for going off topic but I am hearing on Talk Sport De boer is in the frame for the Spuds job and Bergkamp would be his number two. Please, someone tell me it isn’t true.
Jack has a two match ban for his finger gesture at Man City.
Valentin,
And what about the all-important Cesc transaction? He’s been left out. Is that one cleared as yet, or are they owing AFC? How do you source these items? Cheers for the info to date.
Mick,
I’ve just been sick in my mouth.
Mick, who knows, but I would not believe anything from talkshite. Heard about jack getting a two match ban, despite a precedent set by Suarez getting one match for the same offence. Oh well, we are getting used to different laws for Arsenal.
@Mandy Dodd
Apparently Tom Ince got a two match ban for a similar offence.
I doubt De Boer will be manager at Spuds he is doing a big project at Ajax plus they did that nice PR for the ill boy.
Dennis will not be going to WHL.
I would bet that they will be easy on Barcelona because of the independance voting thing.
Guys, not trying to act smart or anything, but would like to inform that i think the most powerful and reliable organisation in the world relatively is the European Union (EU). I have predicted this a long time ago. I am a tax paying, law abiding citizen from a country in asia where bribery and corruption is so rampart that I feel I am living in a stone age era. Bird brains elect fellow bird brains for bird shit under table amount to perform bird shit quality of duties for bird wreck propaganda. Thats the reason why I never voted in my 15 years of legal age life. Very depressing. I was in Europe once and met a well educated German and got to know things about law, constitution and legislation over there. Travelling there for over a year open my eyes really. Coming back to the topic above, EU will never be intimidated by any other organisation for self interest, just that they take their time and wits to enforce their policies legally and without doubt and fault. They take pride in that. The English FA got stick to their face after making much noise about foreign players rule years ago. Now the Spanish FA are going to get the same after thinking they got away with their wrongdoings. This plague got to stop so please EU, do what you have to do.
similar Mick, but Ince gesture aimed at officials, Suarez at crowd, so if they are going on precedents, there is only one,
Michael Ram,
The EU will not sink itself by inflicting damage on the very shaky at best Spanish economy which it would have to find a way to bail out – a massive bailout. EU’s crushing Barca/RealMad in the principled way that you are calling for and believing in would be, well, principled; but they are pragmatists overall and will not deal a self-inflicted wound of that magnitude. Not only are Barca/RealMad the “spanish football brand”, but they are “Spain’s brand” and “Catalonia’s brand” and Europe will not do an own goal to satisfy principle, as you correctly call for, but, methinks, too wishfully expect.