EU
prepares to blow final whistle on Spain's debt-ridden football clubs
The Guardian
Deportivo among teams facing extinction if competition authorities force
Spanish officials to collect taxes
It is the powerhouse of global
football, home to its greatest players and a World Cup-winning national team,
but Spain's
soccer bubble looks set to explode as European authorities prepare to halt
public funding of debt-ridden clubs.
In a move that threatens to
provoke the partial collapse of a football system built on unsustainable piles
of debt, competition authorities in Brussels want Spain's government to explain
why it has allowed clubs to build up vast, unpaid tax and social security
debts.
With many clubs in the top two
divisions already having trouble paying bank debts totalling some €3.5bn
(£3bn), the move would likely force some clubs into liquidation. Historic names
such as Deportivo de La Coruña or Racing Santander could simply disappear.
Other top clubs, such as Valencia, will have to sell players and face years of
decline.
Indignant MEPs are already
demanding to know why Spain is happy to request €40bn in aid from eurozone
taxpayers for its banks while allowing the clubs to build up a tax debt of
€692m.
"This is unfair since all
other Spanish taxpayers, as well as the other European football clubs, must, of
course, be up to date with their tax payments," said Willy Meyer, a
Spanish MEP for the United Left coalition, in a recent question to the
competition commissioner, Joaquín Almunia. Meyer pointed out that while clubs
pay multimillion-euro
salaries to star players, the cash-strapped government of Mariano Rajoy has
imposed cuts on public services.
"It is incomprehensible that
while taxes such as VAT are being increased and hospitals and public companies
are being privatised as a means of generating short-term resources, these
private, recreational bodies are receiving preferential tax treatment," he
said.
Other European soccer clubs are
also crying foul. "This beggars belief. We pay hundreds of millions of
euros to keep Spain out of the shit and then they let the clubs off their
debts," Uli Hoeness, the president of the German side Bayern Munich,
complained when debt figures were made public last year.
A spokesman for Almunia said a
formal investigation – similar to one looking at public subsidies to Dutch
soccer clubs – must wait until the Spanish government has replied to its
inquiries.
Analysts warn that action from
Almunia to force Spain's tax authorities to recover debts will expose the
chronic financing problem in Spanish soccer.
Professor José María Gay de
Liébana, 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 people ask me what
clubs could be in danger, I reply with the list of the only clubs that are not
in any kind of danger. They are Barcelona, Real Madrid and Athletic
Bilbao," said Gay de Liébana. "Hoeness is, basically, right. If I don't
pay my taxes, then the authorities come after me. But that doesn't happen to
the clubs, which are not treated like other companies."
Twenty-two first- and
second-division clubs are in insolvency proceedings or have been in recent
years. Several are thought to be struggling to survive strict debt-repayment
plans imposed by creditors. They include former league title-winners such as
Deportivo de la Coruña and a long list of historic clubs such as Zaragoza,
Racing Santander, Mallorca, Albacete and Betis.
Deportivo – semi-finalists in the
Champions League in 2004 – had been allowed to build up a tax debt of €96m, a
report to an insolvency court this week revealed. "The real cause of the
insolvency is a complete lack of realism in management, taking on spending and
investment that is absolutely beyond the club's economic possibilities,"
the club's administrators wrote.
Indirect funding of clubs via
publicly owned TV stations and loan guarantees from regional governments are
expected to come under scrutiny in Brussels.
Valencia, one of Spain's top
clubs, passed temporarily into public hands this year after it failed to pay
back a loan guaranteed by the regional government. It is now in the hands of
the Bankia bank, but this was nationalised after it ran up €19bn in losses last
year, meaning the club – which has had to stop work on a vast, half-built
stadium in the city – is now in effect owned by Spanish taxpayers.
Two other clubs, Elche and
Hercules, are also part-owned by Valencia's regional government, which
guaranteed loans that they failed to pay back.
"Is it the European
commission's intention, in rescuing Spanish banks, to allow the practice of
granting bank loans at subsidised rates to clubs in the Spanish professional
football league – which is a form of favouritism – to continue?" the Italian
MEP Mario Borghezio asked in a parliamentary question.
Almunia's commission confirmed
that it had asked Spain to provide it with figures on clubs' public debts.
"The commission agrees that,
under the state aid rules, tax and social security debts of professional
football clubs must not be treated differently from similar debts of other
economic actors," Almunia said. Rajoy has ordered tax authorities to
tighten control of clubs and the sports minister, José Ignacio Wert, says debt
has begun to fall.
Several clubs, including
Deportivo de La Coruña, have seen television or football pools income
embargoed. The debt has been reduced since early last year, but progress is
slow.
"This cannot be sorted out
overnight," said one source close to the Spanish tax authorities.
"Soccer is a very highly
charged affair. If you go after a club too much, then the supporters may rise
against you," said Gay de Liébana.
He believes that is why
authorities are targeting Deportivo de La Coruña rather than a highly indebted
but well-supported club such as Atlético Madrid. "Deportivo fans are not
going to block the streets of Madrid," he said.
As clubs tighten their belts,
players will be sold and the quality of soccer in Spain will likely fall.
"Talent will flee to the Premier League in Britain or elsewhere,"
said Gay de Liébana.
The Spanish case and the Brussels
inquiry into €10m of public aid to several Dutch clubs, including PSV
Eindhoven, threatens to spill over in to other countries.
"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.