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Barca, Madrid prosper but Spanish league falters
Question of the Day
MADRID (AP) - One year after Spain celebrated its World Cup triumph, its national soccer league is beset by debt, mismanagement and bankruptcies.
Twenty-two Spanish clubs have gone into bankruptcy protection since lower-league team Las Palmas started the trend in 2004. On Friday, Racing Santander became the sixth insolvent club in this season’s 20-team top division, which opens Aug. 21.
The Associated Press spoke with several club directors, financial experts and soccer figures. They agreed on a number of factors that have led to this trouble: large transfer fees, inflated players salaries, ego-driven owners with little fiscal responsibility and a clear divide in the distribution of television money.
While Spain celebrates the one-year anniversary of its World Cup victory in South Africa, Barcelona and Real Madrid are moving further away from the rest of the 18 teams in the league. UEFA’s Fair Play rules _ which demand that clubs do not spend beyond their means _ can’t come quick enough.
“There’s a systemic problem with the structure of the league and the way it works _ it’s almost like financial doping,” Osasuna director general Javier Gomez told the AP. “Now when you see that half of the teams in Spain are in bankruptcy protection, it seems almost like the problem was inevitable.”
The new UEFA regulations limit the ability of owners to subsidize losses incurred by paying high transfer fees and salaries, making them only spend what they earn from football-related income if they want to play in European competitions. Owners can cover losses up to $88 million over an initial three-year spell, starting in 2012.
According to consulting firm Deloitte, the Spanish league’s revenue grew more following the 2009-10 season than any other league in Europe _ by 8 percent to $2.3 billion). Much of that revenue was driven by Madrid and Barcelona, who combined to gross $1.2 billion.
But their money is doing little to help the other 18 clubs, whose poor management has been further exposed by the country’s economic crisis. Only a handful are certain to pay their players regularly. Approximately $43 million in unpaid wages is still owed to more than 100 players.
“Only a little while ago the Romanian federation sent out a letter to all of its players saying not to sign any contract unless it was perfectly clear. They were saying don’t go to Spain, there’s no money there,” said Luis Rubiales, the head of Spain’s Association of Football Players who previously played for Levante, which is also insolvent. “I’m not very optimistic because, just as in Spanish society, the solution only comes when something has already happened.”
The industry was booming over much of the last decade as Spain reveled in record economic growth spurred by the housing boom. Madrid inflated the transfer market to finance its “galactico” projects and the rise of player salaries followed.
“The problem was ego and some pretty absurd cases in the running of the teams,” University of Navarra economics professor Jaume Llopis said. “The banks don’t give small business loans out but (that) Madrid gets $141 million to sign a player is just absurd.”
A turning point came in 1990 when clubs became privately owned, aimed at erasing debt and allowing for better monitoring of accounts. Madrid, Barcelona, Osasuna and Athletic Bilbao were the only four not to follow the privatized model and are owned by club members. The two Basque clubs stay afloat through tight fiscal responsibility, and relying on their youth ranks, where the bulk of its investment lies.
Osasuna, which translates into “health” in Basque, must have strict financial controls since the small town of Pamplona offers a narrow fan base and limited income.
“There’s no debate. This is the only way,” said Gomez, Osasuna’s director general. “You can look at it from any number of points of view but a football team naturally belongs to its people. It’s nonnegotiable.”
Gay’s study showed topflight clubs combined for a net loss of $140 million at the close of the 2009-10 season while total debt stood at $4.8 billion _ double the amount of the $2.25 million revenue.
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