Spanish spending rules unlikely to rein in clubs
Reuters - Monday 18 July 2011, 02:00
MADRID - Spanish football's bid to police
itself with rules aimed at curbing financial excess goes in the
right direction but there are serious doubts as to whether it
will be enough to reverse an entrenched culture of profligacy.
The country's professional football league (LFP), which groups
the 42 clubs in the top two divisions, last week backed the
proposals which are in line with UEFA regulations that begin to
come into force next season.
Under the new rules, Spanish clubs will have three years to
get their finances in order and the LFP will create a committee
of independent professionals to analyse accounts and recommend
sanctions for transgressors from the 2014/15 season onwards.
These could include docking points or the withdrawal of
licences for the worst offenders.
"The intention is positive but I see a lot of practical
problems in the implementation," said Jaume Llopis, a senior
lecturer at the IESE business school in Barcelona.
"Given the state of many clubs' finances, it is going to be
extremely difficult to enforce these rules within three years
when the sanctions are due to kick in," he told Reuters.
"But at least it might force them to reflect and perhaps
encourage some to be more rigorous in their management."
Recently published figures on the finances of Spanish football clubs make for grim reading and the lack of transparency and
up-to-date accounts for some suggests the situation may be even
worse than the available data indicate.
Many clubs have drastically overspent on players and wages
in an attempt to stay competitive and preserve their status in
the top two divisions.
The Spanish system of clubs negotiating contracts with
television companies individually, unlike in rival European
leagues where a system of revenue-sharing is in place, has
exacerbated the situation.
Around half the pot of Spanish TV income of some 600 million
euros is paid to increasingly dominant Real
Madrid and Barcelona, the world's two richest clubs by revenue.
"SOCIAL CHAOS"
Racing Santander this month became the latest side to seek
protection from creditors, joining fellow La Liga clubs Real
Mallorca and Real Zaragoza as well as all three teams promoted
to the first division at the end of last season - Real Betis,
Rayo Vallecano and Granada - in administration.
A study published last month by Jose Maria Gay, an
accounting professor at Barcelona University, showed the 20
clubs in the top flight made a combined net loss of some 100
million euros in the year to the end of June 2010, up from
around 19 million in the year-earlier period.
Total debt shrank slightly from the previous year, to 3.43
billion euros, but was still more than double revenue of 1.61
billion.
A separate study Gay published this month showed the 22
second-tier sides made a combined net loss of some 43.1 million
euros in the 2009/10 season and total debt was more than 550
million.
Llopis at IESE noted several potential problems with the
LFP's new regime and said that if the rules were applied to the
letter around 50 percent of Spanish clubs would disappear,
unleashing what he called "terrible social chaos."
One difficulty he picked out was that when Spanish clubs
seek voluntary administration they are automatically protected
from sanctions, which would render the LFP rules irrelevant.
Another problem is that football clubs have a special status
in Spain and the authorities would be extremely reluctant to do
anything that might threaten their survival.
"No government would ever have the courage to call in the
debts to the social security system and the tax authorities for
example," Llopis said.
"I don't think much is going to change because there are
some things that are untouchable," he added.
"Do you imagine that a club like Real Madrid would ever be
relegated to the second division because it had too much debt?
Impossible. Nobody is capable of taking that decision."
REVENUE SHARING
Gay at Barcelona University noted that the LFP's planned
committee of independent professionals would report to the
league's existing Economic Control Committee.
"The doubt therefore arises that if an Economic Control
Committee has already been in existence for some time then what
exactly has it been doing," he asked.
"There are also question marks around who will be marking
out the economic course for clubs to take and if they will have
power and independence to decide.
"If they are not given independence this package of measures
will be good for absolutely nothing."
Both Gay and Angel Barajas, an associate professor of
financial management at the University of Vigo, believe the
introduction of an effective system of TV revenue sharing would
help to ease the financial difficulties of many clubs.
An agreement Real and Barca brokered late last year with 11
other top-flight sides on sharing some of the TV cash from 2015
is likely to cement their advantage while helping the others
only marginally, analysts have said.
Figures collated by Gay for the 2009/10 season show Barca
earned 158 million euros from their TV deal, or 26 percent of
the total, and Real 136 million euros, or 22 percent.
Real's city rivals Getafe, UEFA Cup quarter-finalists in
2008, earned a mere six million, or one percent.
In the English Premier League, by contrast, Manchester
United made 64.5 million euros from domestic TV rights in
2009/10, some 5.8 percent of the total.
Far smaller clubs such as Wolverhampton Wanderers (43.8
million) and Wigan Athletic (42.8 million) were given about four
percent of the pie and seven percent was reserved for clubs who
suffered relegation from the top flight.
Gay said clubs should take immediate steps to centralise the
negotiation of TV rights and use the proceeds to renegotiate
their most pressing debts.
"This needs to happen not in months or weeks or even days
but in hours," Gay said. "Otherwise the dance of bankruptcies
and insolvencies will continue."