x Abu Dhabi, UAEThursday 27 July 2017

World Cup triumph masks dire financial state of Primera Liga clubs

Spain's triumphant march to their first World Cup success has deflected attention from the parlous financial state of many of the clubs living beyond their means in the domestic league.

POTCHEFSTROOM // Spain's triumphant march to their first World Cup success has deflected attention from the parlous financial state of many of the clubs living beyond their means in the domestic league. Even Primera Liga champions Barcelona, second on accountancy firm Deloitte's latest list of the world's richest clubs by revenue, admitted cashflow difficulties last week. Sandro Rosell, the club's new president, has said the Catalans were seeking a ?150 million (Dh690m) bank loan to address "liquidity problems".

Spain's worst recession in at least 50 years, the collapse of the real estate market and surging wage and transfer costs have combined to push clubs deeper into the red and forced some, such as Real Mallorca, into administration. The situation has been critical for some time but little action has been taken by the Royal Spanish Football Federation (RFEF), the Professional Football League (LFP) or the Socialist government.

A large part of the problem is the power wielded by Barca and their big-spending arch rivals Real Madrid. Real topped Deloitte's Football Money League with income in the 2008/09 season of ?401.4m compared to Barca's ?366m. Unlike in rival European leagues, deals for television rights, a key revenue stream for football clubs, are negotiated individually and Real and Barca rake in about half of the ?600m television pot between them.

"The financial instability in Spain is mainly due to excessive outlay on players," Angel Barajas, the associate professor of financial management at the University of Vigo, told Reuters. "This elevated spending is an attempt to remain competitive with clubs like Real Madrid and Barcelona who have a much bigger revenue-generating capacity. "It means a lot of clubs invest quantities in players that are greater even than what they are capable of earning.

"They accumulate debts that they cannot cope with and go into administration or have to sell off assets to survive." The LFP has proposed capping the amount spent each year on players' wages and transfers at 70 per cent of income, but analysts have warned against the measure. The battle over income from Spanish television deals escalated in May when some of the country's richer teams said they planned to create a breakaway from the Primera Liga.

Poorer clubs had urged the government to introduce the system used in the English Premier League and elsewhere where deals are negotiated collectively but Jaime Lissavetzky, the secretary of state for sport, told Reuters the government was not prepared to intervene. A study by Jose Maria Gay, a professor at the University of Barcelona, published in May, showed the 20 Primera Liga clubs had a combined debt of ?3.526 billion in 2008/09.

Only Real and Barca and lowly Numancia, who were relegated, made an operating profit. "The problem with Spanish football is exactly the same as the one that led the country as a whole into the current crisis," Gay told Reuters on Friday. "Spending beyond earning capacity, falling back on borrowing from banks and paying too much for assets, above all players. "In the end, if there is no profit, what is happening now occurs: losses, unmanageable debt and uncertainty reigning over Spanish football."

* Reuters