Spain’s all conquering national team may be broken up, on club basis at least, as the European Union prepares to blow the whistle on the shocking truth about football finances within Spain.
The story starts in the Netherlands of all places with an enquiry by the EU. The investigation is looking into the misuse of public aid being siphoned into football, into clubs such as PSV Eindhoven and NEC Nijmegen. League leaders PSV form the tip of the iceberg, and are being investigated over a sale and leaseback deal with its local authority over its stadium in a bid to purge some of its debt. In 2011 PSV sold their stadium, the Philips Stadion, (pictured above) for €50 million, buying the rights back at a fraction of the price. Not only is this in stark contrast to what UEFA are demanding for financial fair play, but the EU is investigating whether this is against EU state aid rules.
In line with this enquiry, the finger then points to Spain. Whereas the Dutch economy is stable, the Spanish is not, and is currently receiving EU funding to help bail out their economy. With many clubs in the top divisions struggling to pay their debts, totaling some €3.5 billion, the move by the EU to force clubs to pay would force some regular names into liquidation. Indignant MEP’s are demanding to know why Spain is happy to request €40 billion, whilst allowing football clubs to owe the taxpayer €692million.
Other European clubs are crying foul of this. Uli Hoeness, president of German powerhouse Bayern Munich complained “This beggar’s belief. We pay hundreds of millions of euros to keep Spain out of the sh*t and then they let the clubs off their debts” when debt figures were recently released.
Professor José María Gay de Liébana, (pictured left) of the University of Barcelona, said reckless lending – especially by former savings banks controlled by local politicians – had created a bubble that must eventually burst.
When pressed as to what clubs would be in danger of being forced into liquidation Gay de Liebana states the only clubs safe are Barcelona, Real Madrid and Athletic Bilbao. It appears football clubs in Spain are not being treat like any other tax payer. If they don’t pay their taxes, the authorities go after them, in contrast to football clubs.
Twenty-two first and second division clubs have been, or currently are in insolvency hearings, with several of these on the verge of collapse. This list includes former league winners Deportivo de La Coruña, and historic clubs like Zaragoza, Mallorca and Real Betis.
Deportivo de La Coruña – a Champions League semi-finalist in 2004 – has been allowed to rack up a tax debt of €96m by the authorities. The administrators commented that through mismanagement debts have spiralled out of control. Their current financial position poses a real threat to the existence of the club.
Indirect funding of clubs via such mediums as publically owned TV stations and loan guarantees from regional governments are expected to be investigated.
Valencia are a key example of this. Historically one of Spain’s top clubs ran up huge debts trying to buy their way back to the glory days. With debt spiraling out of control, and being forced to sell some of their top stars such as David Villa and David Silva, a loan was taken out and guaranteed by the regional government. The only problem is their debt far exceeded the payback terms and the team passed into the hands of Bankia bank, which itself was nationalised after it ran up loses last year of €19 billion, meaning the club has had to stop work on a vast new stadium, which is half built. The club and stadium is in effect owned by the tax payer.
The Spanish sports minister comments that since the start of last year, the general level of debt has fell, but the progress is slow.
Football is a highly charged affair comments Gay de Liebana and “if you go after a club, the fans will rise up against you”. He believes that is why authorities are targeting clubs such as Deportivo La Coruña rather than larger clubs such as Atletico Madrid. “Deportivo La Coruña are not going to block the streets of Madrid” where the nation’s government is situated.
As clubs in Spain tighten their belt, the talent pool will eventually move to more prosperous nations such as the Premier League in England or Bundesliga in Germany, where teams seem to be a little more financially stable than Spain. However this story has long to run, and if the EU begin to put real pressure on Spain for their clubs to begin to repay debt, then other countries may well be drawn into the financial mess.
“If you start asking Italian and French clubs whether they are paying market rents for municipally owned stadiums, we will get into a very big tangle,” said Gay de Liébana.
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