For those of you following La Liga from outside Spain you can be forgiven for believing that everything’s rosy on the pitches and terraces at the Bernabeu, Nou Camp, Mestalla and Vicente Calderon to name but a few. As the Spanish national team finally realised their destiny by winning the World Cup and two European Championships fans the world over were able to marvel at the wonderful talents of Iniesta, Xavi and the rest of ‘La Seleccion’. At a domestic level FC Barcelona have probably been the best team in world club football for the past decade whilst Real Madrid are the most successful club team of all time. But let’s stop there with the accolades as there’s a much darker story only just beneath the surface.
How is it that a country where outrageous levels of debt and obscene levels of unemployment is home to two of the world’s richest sporting institutions? The answer lies in looking beyond Real Madrid and Barcelona for the moment and taking a look at what happened at last month’s Copa del Rey quarter final between Racing Santander and Real Sociedad.
Racing Santander were formed in 1913 and have spent most of their existence in the top level of Spanish football. Plagued by debt in recent years they were forced into administration and suffered two successive relegations to the third tier of the national sport. In spite of their lowly position they managed to defeat top flight teams, Seville and Almeria, on their way to the quarter final of the Copa del Rey. They lost the first leg 3-1 in San Sebastian so had to overturn that two goal deficit if they were to progress to a semi final date with FC Barcelona. But the match never happened. The Real Sociedad players warmed up on one side of the pitch whilst the Racing players stood together in the centre circle and refused to play. This was their response to months of unpaid wages. The players had stated that they would take such action prior to the game unless the club’s president and his board resigned. Fans of Racing Santander applauded their team and players from teams all over the country supported their action.
Football Debt v Club Value
These are not teams in the Europa League!
This is just one example of a small club with no money. Racing Santander only made the news thanks to their stance in this particular match. In total it is estimated that the combined debt of all the clubs in La Liga amounts to approximately €4.1 billion. Interestingly Racing’s €50 million of debt pales into insignificance next to the total debt of the big clubs but the key figure here seems to be debt as a percentage of overall club value. The Forbes Rich List shows Real Madrid as the world’s richest football club. They are valued at $3.3 billion with a total debt of $165million which represents just 5% of their value. Barcelona’s accounts show debt of $156 million representing just 6% of their overall valuation of $2.6billion. So whilst the big two splash the cash on the latest superstar on their shopping list, the minions of Spanish football aren’t even getting paid for going to work.
Level Playing Fields in Madrid and Barcelona?
A number of Spanish football clubs are being investigated by the EU with regard to illegal state aid in the form of favourable loans, dubious land deals and favourable tax regulations which could be worth several billion Euros. The national government itself has been accused of apparent negligence in collecting the tax debts of numerous football clubs which have spiraled to around €663 million. A fairly significant figure when you consider that Spain is the recipient of a European Union bailout worth around €100 billion!
Joaquin Almunia, an Athletic Bilbao fan, is the competition commissioner at the European Union. He is responsible for ensuring that businesses across the whole EU face fair competition and that includes the football industry. He is leading this investigation into Spain’s football clubs and clearly acknowledges that clubs must stand on their own two feet rather than relying on state benefits.
On tax issues alone it seems that Atletico Madrid are the worst offenders with tax debt in the region of €100 million. But this story gets a lot worse. That tax debt does not even include four clubs which are classed as ‘member-owned football clubs’. This means the government consider them as ‘not-for-profit organisations’ which provides them with enormous tax advantages. So who are the privileged few? First of all there’s Osasuna, a relatively small club from Pamplona, then there’s Athletic Bilbao who were one of the founding members of the Spanish league back in 1929. And finally there are two other clubs owned by their ‘socios’ that you might have heard of … Real Madrid and FC Barcelona!
The combined value of these two clubs according to Forbes is $5.9 billion making them two of the world’s richest sports clubs ahead of even the New York Yankees and Dallas Cowboys yet it seems they don’t need to pay the same taxes as everybody else. Youth unemployment in Spain is 50%, the number of homeless people in Madrid has reached frightening proportions and queues outside soup kitchens in the capital is a sharp reminder that this country is virtually on its knees. Yet just a couple of kilometres up Paseo de la Castellana all seems well at the Santiago Bernabeu stadium unless you’re Cristiano Ronaldo who’s still upset that all the referees are against him! The Spanish Government refuses to disclose how much the four privileged clubs owe to the national Treasury.
Football fans I’ve spoken to throughout Europe often complement Spain’s big two football clubs for this member owned business model. In theory there’s a lot to be said for it on a social level but on the pitch it generates grossly unfair competition as only four clubs are granted these favourable financial conditions. No doubt fans in England could point out that this is preferable on a sporting level to having billionaire owners who buy success with their vast fortunes.
Such favourable tax advantages provide a rather worrying reminder of 1950s Spain under the dictatorship of General Franco when football was seen as a way of pacifying the masses. Such was the popularity of the sport that the regime saw the advantages of providing as much coverage of football as possible as way of minimising social unrest and political activity:
Most Spanish fans treated futbol as a religion, and this fanaticism was reflected in the existence of three daily football papers in Barcelona and two each in Bilbao and Madrid. These papers, and the prospect of the next match, helped the worker to get through his daily low paid drudgery. Without the game, and the other manifestations of this ‘culture of evasion’ which occupied the free time of the workers, such as radio and TV serials, the cinema and photo-novels, Franco would almost certainly have had to face an angrier and more politically mobilised working-class in the 1950s and 1960s.
The above quote comes from Duncan Shaw who describes this policy in his excellent article entitled The Politics of ‘Futbol’
This investigation into unfair dealings in Spanish football goes beyond these huge tax issues. Real Madrid’s training ground used to be at Ciudad Deportiva just a stone’s throw from their stadium. Back in 1998 this land was valued at €595,000 when the club bought it from the City Council of Madrid. In 2011 a property swap of this prime real estate (also not in the Europa League!) allowed them to sell this same land back to the Council for €22.7 million. Three football teams in La Comunidad Valenciana (Valencia, Hercules and Elche) are also under investigation with regard to state loans which were used to bolster their dwindling finances. Even the TV deals in Spain favour the ‘Big Two’ who get about 42% of the revenue whilst the rest is split amongst the other 18 clubs in La Liga. No wonder the league’s a two horse race!
Such is the importance of the Spanish football and tax issue that it is expected that the case will be referred to the European Court of Justice. The government has announced that from next season the tax authorities will be taking 35% of football TV revenue at source. Whether the football powers that be will permit this remains to be seen. And finally, back in Santander the club were fined €3,006 for refusing to play their cup match and have been banned from next season’s competition. FC Barcelona beat Real Sociedad in the semi final and now face Real Madrid in the final!
What Do You Think?
Is it fair that the Spanish Government effectively subsidises its select football clubs during times of severe economic austerity?