Malaga is one of the Spanish clubs that has a large debt to the tax authorities (photo archive).
The good old prosperous days for Spain’s football clubs are definitely over. The economic crisis in the country has dried the economic wells that used to provide generously for the clubs in the Spanish leagues.
Now, the total debt to the Spanish tax authorities accumulated by the clubs adds up to almost €800m and a large majority of the clubs are close to bankruptcy. As many as 21 clubs in the first and second divisions have had to enter into agreements with creditors, a first step that could eventually lead to a bankruptcy.
Despite this, the clubs are not doing as bad as one would assume, as they have enjoyed a sort of privileged situation that allows them to survive despite their huge debts.
It is as if the football clubs in Spain – most of which work as so-called Sociedades Anónimos Deportivas, a special kind of 'commercial sports associations' owned by individuals or companies – have almost been allowed to do as they please.
There has been little concern in Spain over the growing debt problem in many clubs for many years and compared to other European leagues, there have not been any serious consequences for indebted clubs.
Europe has had enough
But now, Europe has had enough. Several European clubs have begun to protest and urge that, once and for all, the 'bubble' must burst for Spain's football clubs.
Some European clubs, such as the German club Bayern Munich and the Dutch club PSV Eindhoven request that drastic measures are taken against those clubs that don’t comply with their financial commitments. They don’t want Spain to play with more advantageous cards any more.
The case reported by PSV Eindhoven last week is a clear example of what occurs in Spain. When the Dutch club sold the player Arouna Koné to Sevilla, it was included in the agreement that in case he would leave the Spanish club, they would have to pay the amount of €2m to the Dutch club, which it has not done.
Annoyed with the situation, the Dutch club decided to report it, with the clear intention of criticizing the tolerance for incompliance with financial commitments by Spanish clubs: “It is strange that the Spanish clubs can continue buying players and paying high salaries, while they don’t pay to their creditors because they are administratively bankrupt. This must change.”
Not 'fair play'
In Europe, many consider that the permissiveness towards the indebted clubs is not fair play, and the attack on Spanish football by PSV Eindhoven is not the only one that it has received lately.
“We cannot accept that the Spanish state allows its clubs to have a debt of over €750m and Germany is giving a lot of money for people to survive,” said Uli Hoesness, president of Bayern Munich, and one of the most outspoken critics against this situation. “I think everyone should be treated equally, and to me it seems incredible that in Spain three years ago there was a maximum tax for football players of 25 percent. In Germany, they pay 45 percent.”
In fact, the amounts of the debts are enormous, including for those clubs that show positive developments, which is the case of Real Madrid. The club – which is one of a small number of clubs that are not run as a 'commercial association' but is owned by its members – reported that its net financial debt amounts to €170m. It equals a 1.1 debt/EBITDA ratio, a measure of the relation between the debt and the operational profit-generating ability.
Despite this, the club’s accumulated debt is higher than that of all the teams in the Bundesliga, the German league, together.
While clubs in first and second divisions of other European leagues have had to face consequences if they accumulate debt - such as administrative relegations, banning teams from playing in the leagues, and the removal of points by the beginning of the seasons - in Spain, although there are regulations, there have not been any serious consequences for the clubs that don't comply.
First steps to change situation
Spain is taking steps to change the situation. A new Sports Law has allowed the Spanish Professional Football League to intervene in the clubs and make sure that they comply with debt payments. Until now, the League has not had legal authority to control or put sanctions on clubs that don't keep balanced accounts.
Instead, the clubs have managed their accounts themselves directly with the local or regional authorities, tax authorities and, in many cases, with the local savings banks, which has allowed to create the situation of debt.
Another step to change the situation was taken with the approval of another law in September that will oblige clubs to pay their debts or they risk relegations. After July 31, the clubs will not be allowed to assume new debts, while they can renegotiate their current debts with the tax authorities.
Despite these efforts, however, Miguel Cardenal, president of the High Council for Sport, believes it will take at least until 2020 before the debt situation for many of Spain's football clubs is solved.
A longer version of this article is available in Spanish here.
It was translated and edited by Stina Lunden.
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