Masked by football: Spain's crumbling economy

Don't be fooled by the title; I'm not about to go through Spain's fiscal issues. What I am going to talk about though is the current problems that are shielded from the average television viewer.

"The top division alone holds a combined debt of $4.61 billion through the 2010-11 season, with six of the teams in bankruptcy protection with payments due by June 30."

You did read that right, four point six one billion dollars. That was last year and I'm sure, if there aren't changes that by the end of this current season and with Spain's downturn not willing to see an upside, this number will have increased closer to $5bn. Looking at current Spanish Government assessments, clubs from the top two divisions owe $988m in unpaid taxes and over the last four years, that's nearly a $200m increase.

It may seem rosy in La Liga with viewers and pundits running out of superlatives but being rosy couldn't be further from the truth. How apt the term 'rose tinted goggles' now seems. To put it into perspective, Real Madrid's current debt stands at $773m, Barcelona's at $756m and Valencia's is $500m. When you speak of debt, you automatically think of Manchester United and contextually, their debt stands at $700m and that is something that is being serviced quite well considering. In terms of revenue, the top teams in Spain's debts far eclipse revenue figures and when you're touted as some of the richest sports teams (sports, not just football) on the planet, it seems the goggles are on pretty tight.

This whole matter is a double-edged sword in that the Government cannot expect these taxes to be paid straight away as it is impossible. Due to this teams will continue to delay tax payments and create a bigger all round debt figure. On the other hand, the Government can't use the force they're entitled to use as La Liga's image is growing exponentially and with that comes an incredible amount of commercial value.

Spanish football as a whole is pleasing to anyone that wants an education in how the actual sport should be played. Even the feigning of injuries and incessant surrounding of referees adds to the theatre of it. Using empathy, imagine England's economy was on the verge of needing a bailout and the only thing to take your mind off of a flagging economy was watching your favourite stars every weekend in the Premier League. What would you think if the Government then demanded most of the teams to put themselves into administration by demanding all debts to be paid within months. No Government wants to be the bad guy when football is such a healthy distraction and that's the problem right now in Spain. Unemployment is rising and the Government are already hated amongst the masses with the current austerity measures being put in place. Football is what the people need to get away from what scares them.

Government threats are in place and teams in La Liga are beginning to fear them. Firstly due to UEFA's Financial Fair Play system that is coming into force in the next few years and secondly from fear of not existing to even participate in FFP. In terms of 'living within your means' only Valencia, Atheltic Billbao and Osasuna would survive outside the top two teams according to a Financial and Economics Professor. 

When discussions are taking place about how best to tackle the monetary problems within La Liga, all discussions always come down to TV rights. We are all very much aware of the favouritism involved when TV money is handed out and I'm not going to focus on that as that's an exhausted subject. Using perspective again, the next team in line is Valencia. They receive $55m less than what Wigan get in the Premier League and this is a team that fights for relegation each season. Claims are made that La Liga is the best league in the world, but when you only pull in half of what the Premier League ($1.66bn) and two thirds of what Serie A ($1.198bn) make, it's clear there's something inherently wrong here.

I said before that clubs are beginning to take notice and that can be seen now the transfer window has closed. For the first time in decades, the total tax owed and what is owed to the social security system fell. The best example is the 65% decrease in summer spending by clubs. The largest transfers were Luka Modric to Real Madrid for €40m, Alex Song to Barcelona for €19m, after that Jordi Alba to the same club for €14m. Following those three there were no large expenditures. The stand out figure however is that clubs in Spain made €55m more from player sales than they did from strengthening their squads.

It is pleasing that clubs in Spain have finally seen the light in that they can only spend what they have invested or fear going bankrupt. Debts aside, this is a huge step in the right direction and I, for one, am glad they took the 'better late than never' approach.

Read More...

Transfer Window Anomalies

The end of another transfer window and it's still another one that makes me constantly shake my head in shame at what has just happened. I say shame as I still can't believe it. Some of the money spent is just laughable and I can't see it happening anywhere else in the world to this extent except here. That's what is shameful as I'm sure other countries are looking on and are completely bemused  There's a weird curiosity about it and it's strange that I'm among a minority here.

I read an interesting piece on Rooney not so long ago and it questioned whether he would be worth £50m if he wasn't English. 'Finally' I thought, someone fairly high up in the sporting journalism world has seen sense. Of course he isn't worth £50m. Nobody really should be either. In reading that piece, it made me think of something I wrote last season after Kenny Dalglish spent some of the craziest/funniest amounts on three players. £75m nearly and where are they now? One is on loan to a newly promoted side. One is playing left back to cover injuries and the other can't even get in the side ahead of Jonjo Shelvey; a player that cost less than 1/10th of what was paid for him.

Now the window is closed, I don't think it was entirely Dalglish's fault. It's the culture in this country and the air of superiority factor which has hampered nearly everything from top to bottom. Inflated prices as well as massaged egos has created this monster and I don't believe it will ever change. Not even financial fair play will impact on the attitude or the valuations of some players in this country.

Is any English player really worth £50m? Especially one that smokes, tries his best not to be caught drinking and can't control his own weight? Yes he is probably England's best player but does £50m make sense when Falcao's buy out clause is only £45m. I know who the better player is and this is just a small example when laughable figures are brought into the mix. A better comparison would be to look at Matt Jarvis who cost West Ham ten million pounds. With only one cap to his name and relegated with Wolves, he commands a £10m figure. Capped once for his country and closer to 30 than 20, what makes him worth such an amount when Pablo Hernandez costs only £5m. Is Jarvis twice the player? Hernandez has been capped 4 times by his country and played for Valencia, not exactly a team that would be relegated. So this would lead many to believe the doubled price must be down to Premier League experience which is another flawed argument. Case in point, Michu, La Liga's top goalscoring midfielder last season (15) and cost an astounding £2m. Now he has had no problems at all adapting to the Premier League with 4 goals to his name already. Contrast that with Jordan Henderson who cost £20m and can't get a game let alone score. I find it hard to believe that he is 10 times the player Michu is as, if anything, it's the other way around. Another good example of the fabled adaptation argument can be used with Javier Hernandez. He scored 23 goals in his debut season for Manchester United yet only cost £6m. In comparison, Steven Fletcher who just signed for Sunderland for £12m and who, again, was relegated with wolves is not twice the player Hernandez is. Andy Carroll is not 6 times the player either. It's the Fletcher deal that is quite irksome though as I can't fathom how he costs more than Podolski who is a free-scoring German international and known all over Europe. Fletcher is in fact English but plays for Scotland due to his Mother. Call me pedantic but I'm wondering if he was actually Scottish would this have had an impact on his fee. 

Something I should mention here is that many clubs in Spain are in a lot of debt so it makes sense Michael Laudrup is going there to find some holiday bargains in Michu and Pablo Hernandez but I'm not sold on the fact that clubs here aren't in debt either. Yes TV money is apportioned better here and clubs are run better but it still stands to reason that the figures compared above are, in essence, without merit. 

Managers and club owners alike all complain about agent fees and how Chelsea/Manchester City have ruined the transfer market but an English mentality towards valuations of home-grown talent far outweighs what those two aforementioned clubs have done. Logically you'd have thought after Andy Carroll turned up in the top ten all time transfers on Earth that something would have changed and these inflated prices would take a tumble. On  the contrary, it has snowballed out of control and I can't see an end to it now or any time in the near future. Clubs will continue to be held to ransom and mediocre players will continue to be worth tens of millions more than is warranted and that is a crying shame.

Read More...