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There is a very strong chance that Spain’s financial crash will seriously injure football

Why are agents still pushing their players into Spain?  Why are British clubs still selling players to Spain when they must know (even if it is via prickles in the back of the neck) that there is every chance of several Spanish clubs going into administration or liquidation this year.  And that as a result of which (either directly or through a knock on effect) they won’t be paid the money owed.

Think of it this way.  Real Madrid buys Hardly Anyone, for a world record fee.   They have to do so, because if they should ever fail in a bid like this, they will lose their position as the people who can buy anyone.   So they claim that they can afford this through the utterly ridiculous comment that they will sell shirts.

Although this statement is insane, Untold actually went to the trouble of considering how much the sale of shirts could bring in with a big transfer.  It was a tiny percentage of the transfer fee and didn’t even begin to contemplate the salary.

So what does Real Mad do to pay for it?  It borrows money from a bank that always says yes, and does funny things like the land deals with the local council.  Unfortunately the bank that like to say yes is on the brink of coming to pieces, while the council in Madrid is under investigation from the EU for its Real Mad land deal.

But Real Mad is Real Mad so they carry on, maybe selling some players for crazy prices to help balance the books.  Higuain went to Napoli after Edinson Cavani went from Napoli to PSG leaving Napoli with a potful of money.  Napoli had debts of around €70 million, when the club was declared bankrupt in August 2004 but having written all those debts off they are now seemingly ok.

But they have just got involved in a situation similar to that involving Andy Carroll and Liverpool on 31 January 2011.

Liverpool paid £35 million for him, which had to be way above his valuation, but was paid out because they had lost Torres to Chelsea for £50 million.  By August 2012, Liverpool agreed a £2 million loan deal for Carroll to go away for a year to WHU and eventually sold him in 2013 for £15.5m.  Loss – around £17m.

The problem with these deals in which money from one player is splashed on the next is that while Chelsea and PSG can splash out anything on anyone, and if he’s no good, move on, Liverpool and Napoli can’t.  If Napoli like Liverpool have paid way over the odds for their man to keep the fans happy after a forced sale, they have just made matters far far worse in the long run.

But the point isn’t simply football, although if it were, we would be on the edge of the precipice with clubs like Napoli.  The other half of the picture relates to the Spanish banking system and when (not if) it will enter the final phase of its collapse.

Spain’s exposure to Portuguese debt and unrealized losses on house and land loans are two reasons why the collapse has to come soon.  True, the Spanish banking system was given an all clear last year but that “OK” did not even look at sovereign government bonds.

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Greece and Cyprus went to the edge and fell over, and with Cyprus we saw Greek bonds (which were fundamental to the southern – that is Greek) Cypriot banking system.  With Spain the link, as I have suggested, is Portugal.

Spanish bank exposure to Portugal today is greater than French bank exposure to Greece was in 2010 as France used the ECB rescue programme to get rid of Greek bonds.  You can’t do that any more and the simple fact is that there is a whacking great hole in Spanish banking.  And Spain’s football clubs rely totally on Spanish banking.

If Portugal restructures its debt it will destroy the Spanish banking system.  Worse, delaying a Portuguese restructuring will also do nothing to help Spain.

Meanwhile the eurozone has lent Spain over €41 billion to help its banks survive but that is not enough.  Worse again, that loan allows the eurozone to tell how Spanish banks how to run things.   Worse still, the football clubs are still not getting it.

So, Real Mad owes money to everyone under the sun.  Napoli owes money to Real Mad and quite a few others, and no one has the money to cover the deal.  Thus they go to the bank, and just as the bank is about to say “of course dear boy, you are an asset to the city”, suddenly the economy goes into meltdown and there are no more loans.  No one can pay anyone.

Meanwhile everyone says, “there is no way Real Mad can go bust”.  Just as they say, “there is no way our banks are going bust.”  Or “Scottish football cannot afford to allow Rangers to be relegated”.

And suppose the bank does prop up Real Mad, but Napoli goes down again (or anyone else who owes Real Mad money).  There will still be big hole in its accounts.   And no one around to fill it up.

Want a football bargain?  Start picking them up from Spain.  Oh, come to think of it, Arsenal did with Santi Cazorla and with Monreal.

But to answer the opening question – why are agents pushing their players into Spain?  Answer, because they don’t read the financial press.  And by and large they are not that interested in the long term.

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25 comments to There is a very strong chance that Spain’s financial crash will seriously injure football

  • Family Enclosure Man

    Good article. I have been thinking exactly this for the past 3 years – and yet somehow RM and Barca continue buying at ridiculous prices. Will Arsenal ever see the full money for Fabregas and Song? Will Tottenham ever get the full whack for Bale, whatever the fee is stated as being? For all the frustration that fans direct towards AW and the Board (some of which is merited), at least the club cannot be accused of falling into the trap of the mad financial behaviour that some clubs are prone to. One thing I hang on to is the hope that Arsenal will eventually come out of it relatively well if and when there is a financial meltdown that affects European football.

  • Mike Thomas

    Thought provoking article

    Pushing the argument further I have over the last week or so been trying to work out how Spurs can afford to be pushing the boat to the extent they have.
    Spurs debt was some £83 million and with no CL nor big transfer fees paid post Moderic it has to be either they are spending the Bale money in advance(don’t forget Real will try and pay I over 4,5 or even 6 years) or borrowing in advance of the increase of TV monies irrespective, they clearly are taking a massive gamble for this clearly is their go for it moment not only in terms of transfer fees paid but also their wage bill will be growing at a pace and surely may well have an impact both in UEFAs FFP but perhaps more to the point in terms of the restrictions that now exist in the EPL version. Ironc as Spurs were a mover and a shaker in all this.
    Imagine if Real default on the Bale monies or indeed the balance of the Moderic money
    On the face of it they have signed some decent players but as we all know not all players settle or perform to the expected level

  • blacksheep63

    i suspect nothing will happen unless a powerful regulator gets involved. Clearly not UEFA who couldn’t regulate their way out of a paper bag. I am surprised (well a little anyway) that the better run clubs don’t make more of this. In effect RM and Barca and their ilk are being allowed an unfair advantage. I am often accused of being naive though

  • Adam

    I think with Spurs, it’s more to do with the increase in TV money and transfer fees amortised over the duration of a players contract. There wage bill was lower than ours anyway and they have a little room to play.

    So I think it maybe two fold, TV money and Bales transfer contract to real.

  • Mike Thomas


    Yes the transfer fees will be written off in accounting terms over the period of the contracts but the way in which the transfer fees are to be paid will probably be over a shorter period whereas Real seem always to pay over a long period.
    In terms of wages the % of total turnover Spurs wage costs have been growing over the last few years and will as a result of this windows dealing seem to grow even further but that aside in accordance with EPLs version of FFP wage cost increase over 5% has to be funded by non TV income.

  • James

    Excellent article. Some interesting and important points being raised which I myself have considered recently. I’m curious as to what will happen to Tottenham if RM do suddenly find themselves in the midst a financial crisis. They seem to be throwing the (proposed) Bale money around like a bunch of trailer trash who have just won the lottery..
    Say what you will about old Arsene but at least he puts that economics degree to good use (though him being tighter than a duck’s bum can be frustrating at times).

  • swing

    The irony of this is Arsenal always miss out on great signings to bankrupt clubs. If you take away the benefactors, like Sheick Monsour or Abromovich, Chelsea and Man CIty are also bankrupt

  • Sammy The Snake

    Spurs are spending their future “potential” income, and the sh!t will hit the fan if RM decide not to spend 100M for Bale… 🙂

  • Andrei

    “But to answer the opening question – why are agents pushing their players into Spain? Answer, because they don’t read the financial press.”

    Because agents get paid their commission regardless of what happens tomorrow. So are myriad of other people involved in player transfers. Why governments around the globe are printing money like there is no tomorrow? Because there are many people who make fortune out of it and they are in the good position to survive the market crash that will come as result of these liberal fiscal policies. More importantly football clubs and governments alike simply cannot stop printing money or making new debts even if there was business/political will to do so. It is not possible for them to service the debts/liabilities/commitments they have already incurred without ever increasing the monetary base or market size.

    Finally for those who believe that the UK economy is in any better shape are a bit delusional. Those who remember Sterling crisis in 60s or secondary banking crisis in 70s should know better.

  • HenryB

    A very well argued Post.

    What amazes some of us is that Real Madrid and Barca have been allowed to walk away with a giant slice of the broadcast fees each season, the sum of which, apparently, is greater for them than all the other Spanish clubs put together.

    When Manure, Arsenal, Liverpool, Spurs and Everton tried this broadcasting wheeze on in the early days of the Premier League, the other clubs told them that was fine, and they could play each other because none of the rest would.

    Common sense was soon re-established in the EPL.
    Why did the underdog Spanish clubs not do the same thing?

  • Rufusstan

    @Sammy — agree wholeheartedly, and have been smiling at the possible consequences of Chelsea Hijacking the Willian deal since last night.

    OK Chelsea getting him is not good, but as he is likely to be Spur’s planned replacement for Bale, it suddenly leaves them between the Devil and the Deep Blue Sea (have not replaced him; cannot afford not to sell him).

    @Andrei I kind of agree in terms of everyone still operating on deficit spending and to an extent there is still a bit of the old ‘head in sand; too big to fail’ stuff going on.

    @Mike, Adam — what gets me is that Spurs are splitting their spending, between doing prep work for their stadium, which is as yet to get off the ground, and pumping money into the squad, and I don’t see the cash for both.

    I agree about their costs, they are funding a 90 mil wage bill on 144mil income, (we have dropped ours to about 120mil, with earnings around 240 mil), so they don’t have much leeway.

    It was interesting to see their commercial stuff. They have a new kit deal of about 10 mil/year and have just signed shirt deals taking them up to 20 mil/year (and their commercial guy just got ‘replaced’).

    The point is that outside of the new TV money (£30 mil?) or a new stadium, they are not going to see much extra cash. They are already £37 mil in the hole on transfers + wage bill going up.

    Short of the owner pumping cash in (unlikely), the numbers just don’t add up.

    By the way, it is not just Spain: makes depressing reading.

  • Andrei

    @Rufussian I’m puzzled what people see in Willian. An average player with above average ego. He struggled to break into first team at Shakhtar while not feeling motivated enough to put a decent effort in domestic games and complaining non-stop about wanting to have a new challenge by playing in EPL. Then he happily settled for a bigger paycheck at Anzhi.

    Bottom line Spurs refused to buy him for £25m from Shakhtar last year. Now after not so stellar season with Anzhi and club desperate to sell he is valued at £32m.

  • Shard


    Spurs are the opposite of Arsenal. Arsenal apparently take too long to spend, while Spurs seemingly went wild at the thought of all that money coming in.

    I never really liked Willian. I don’t know why. I only saw him play for Shaktar once or twice, and h was touted as an Arsenal target at one point, but I was never enthused. I’m glad to see that my gut feeling in this case, is backed up by someone who’s seen him play over a period of time.

    Willian going to Chelsea might be bad for us, because there might be a Rooney-Mata swap deal in the offing now, and that will strengthen both teams.

  • nicky

    For the good of the country, it would be advantageous if both Barcelona and Real Madrid were reined in at long last.
    The influence they wield in the overall governance of Spanish football,(indeed much of Spain),simply cannot continue.
    Football’s financial bubble is moving steadily towards bursting. Europe’s economic woes are clearly to be seen, yet many football clubs ignore the signs and continue to spend money that they simply do not have.
    The FFP regs are meant to be the answer, although I feel that the legal advisors of the big clubs will find a way around them.
    The policy of conducting the business of professional football on the “never never” cannot prevail.

  • Rufusstan

    @HenryB — The Spanish system is the same Ostrich as above, Barca and Madrid have always taken the short-term view of their own finances and competing in Europe.

    Its taken the current extreme situation for anything to get done and even then you get the feeling Madrid and Barca would be happy playing 36 El-Classios a year and watch the other clubs collapse.

    In the end, it is the Spanish government that are likely to step in Assuming it happens, it will level the playing field over there a bit, which might allow the smaller sides a better chance to survive, but makes the big two’s situation worse.

    All the other big leagues work that way already. Its been a while, but I think the PL money split was in place from the very start. There was an attempt to breakaway before in ’88?, and the league gave the first division a much bigger split of the pie to keep the big clubs in the league.

    That set the seeds of the PL four years later, along with SKY crashing the party — before ’88 ITV and BBC had submitted a joint (and the only) bid. SKY lost in 1988, but gave the clubs the thought that with competition there might be real money in this TV thing.

    It meant that in 1992, the breakaway was in place with the whole first division resigning.

    By the way, would the Spanish government legislating to force an better TV deal count as undue governmental influence according to FIFA rules? That might end very badly.

  • Rufusstan

    @Andrei — I’ve heard (possibly from one of your posts somewhere), that the guy was potentially trouble, and from the description seems to have a case of the Aderbayors.

    Half the problem these days is that cost, value and reputation are completely out of synch a lot of the time. If someone is willing to pay £30 mil for him; he must be good. On the other hand, if Anzhi are as financially strapped as it appears, why is anyone paying £30 mil for Willian.

    In terns of raw productivity, he offers less end product than Walcott, who for all of the moans about drifting in and out of games is pretty lethal these days,

  • Jambug

    You look at all the insane prices being payed for players.

    you look at the insanity that is Real and Barca.

    You look at the insanity that is Man City. (Not a trophy in sight last year yet somehow they dig up ANOTHER £100 Million).

    You look at the insanity that is Liverpools transfers of the last few seasons.

    You look at the insanity that is Manchester Utds debt.

    Over the last 10 years despite seeing over the building of a brand new £450 Million Stadium Wenger has vertualy broken even in the transfer market and yet has still maintained CL football for 16 consecutive years.(Ok he has’nt WON anything but against a back drop of Clubs showing as much as £500 Million deficit in transfer dealings it’s hardly surprising).

    Then you see a headline in the SUN from that fool Howard ‘POKER FARCE-Wengers transfer policy has gone GaGa’

    All the insanity around and he accuses Wenger of going GaGa !!! You could’nt make it up.

    That Howard is almost as bad as Durham. Every week he’s going on about something. Read, he’s another one. What it is it with these people??

  • Jambug,

    Arsenal just have the misfortune of not winning a trophy in 8 years, which in itself is not a direct result of our transfer policy. Portsmouth, Birmingham City, Swansea and Wigan have much less budget and quality players than Arsenal and they’ve all won something since we last did.

    The current hounding of AW on his transfer policy is downright irresponsible and almost fascistic. Uninformed observer would think that the guy is a lunatic or something based on how every tom, dick and harry have been yelling at him for not spending.

    Journos like Howard are propagandists. They reduce a nuanced issue to false one-liners and then repeat them to death. That’s why the masses love the Sun. The masses are not that smart. The same paper will blame the hardworking immigrants for UK’s economic challenges when all they want is to work and take care of their families while still making positive contribution to the economy. They say nothing about the plutocrats.

    It is open season on Arsenal and I insist that Anthony Taylor’s performance last Saturday was made possible by the vile campaign of calumny being waged against the club by the media and sadly by many of our own fans.

  • Jambug


    One night on TalkSport they’ll be haveing a phone in about the obscene money being paid for players. The obscene wages being paid to players. The obscene money being paid to agents and how the ‘working man is being priced out of the game’

    The very next night they’ll be haveing a phone in to slaughter Wenger because he wont spend obscene money on players.

    Hypocrites the lot of them.

  • Mike Thomas

    For quite a while there has been suggestions that the big European clubs are moving closer to a pan European league managed and run outside both EUFA and FIFA. The key has always been the two Spanish giants and the top English and to a lesser extent the top Italian and German Clubs.
    The CL was a sop to stop a breakaway but at some point something will tip the balance and the breakaway will happen.

  • nicky

    Your 8.43 needed saying. With economic recession staring everyone in the face, the obscene wages being paid to professional sportsmen (particularly top class footballers) simply must be brought back to a sensible level. The inflated valuations for transfer purposes are another disgrace.
    It will probably take a monumental monetary disaster affecting whole continents, rather than just countries, but sooner rather than later it is bound to happen.

  • Stuart

    Regarding your post :

    In 1988, I was 9 years old so much of what happened back then is a blur, especially if it didn’t involve Cowboys and Indians or Airwolf. With regards to football, I have very little memory of the operational side of things that you touch on.

    What I’m getting at is, I’d be interested to read an article that covers what happened back then. Do you ever write? If so, I’d love to read about the early days of the EPL / last days of division 1 (as the top flight). If not, maybe someone else would care to cover this??

  • Brickfields Gunners

    Nice article , Tony , would be happy to follow the developments at Real MadRid and TwatTottering HotSpurts especially if the Bale deal sputters .
    I have a feeling that Arsenal may be looking to Spain for ‘our’ type of players at our desired prices , but not those names being brandied about .Just a hunch , but our last two buys from Spain were true gems .

  • Ray from Norfolk, Virginia

    Your assessment of the Spuds is correct.
    their current spending is like… premature ejaculation.