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Potchefstroom, South Africa. Spain’s triumphant march to its 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 La Liga giant Barcelona, second on accountancy firm Deloitte’s latest list of the world’s richest clubs, admitted cash flow difficulties last week.

New president Sandro Rosell said the Catalans were seeking a $190 million 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, to the brink of bankruptcy.

The situation has been critical for some time now, but little action has been taken by the Spain football association, the professional football league or the government.

A large part of the problem is the power wielded by Barcelona and its big-spending archrival, Real Madrid.

Real topped Deloitte’s Football Money League with income in the 2008-09 season of 401.4 million euros ($505 million), compared to Barca’s 366 million euros.

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 600 million-euro TV pot between them.

“The financial instability in Spain is mainly due to excessive outlay on players,” said Angel Barajas, an associate professor of financial management at the University of Vigo.

“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 battle over income from Spanish TV deals escalated in May when some richer teams said they planned to create a separate first division.

Poorer clubs have urged the government to introduce the system used in the English Premier League and elsewhere where deals are negotiated collectively, but the secretary of state for sport, Jaime Lissavetzky, has said that he sees no reason to intervene.

In an interview at Spain’s World Cup training base in Potchefstroom on Friday, the president of Spain’s football association, Angel Maria Villar, said he did not want to discuss the financial woes of clubs in the domestic league and only wanted to talk about the national team.

“When we are back in Spain there are many questions which concern us, [areas] which we want to improve, which we want to modify,” Villar said.

“When we return to Spain and get back to day-to-day work we will make the decisions we need to make.”

A study by University of Barcelona professor Jose Maria Gay published in May showed the 20 clubs in La Liga had a combined debt of 3.53 billion euros in 2008-09, up from 3.49 billion euros just the previous season.

Revenue growth more than halved to a tepid 4 percent, from 10 percent in the 2007-08 campaign, and operating costs rose to a whopping 1.7 billion euros, outstripping income of 1.46 billion euros.

Only Real and Barca and lowly Numancia, which was relegated, made an operating profit, while total labor costs accounted for an astounding 85 percent of the 20 domestic clubs’ overall operating income.

“The problem with Spanish football is exactly the same as the one that led the country as a whole into the current crisis,” Gay said 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,” he said.

Gay and Barajas said they did not think the clubs’ financial difficulties would threaten Spain’s ability to compete in international competition in the future.

“The success of the national team [in South Africa] could raise the international profile of La Liga and our product would be much better adapted for sale to the wider world,” Gay said.

“The national team is conducting an extraordinary marketing campaign, which will serve to open eyes around the globe to the greatness of our football.

“Now the officials — the league, the federation and the government — and the clubs have to work out how best to make money out of this amazing success. It depends on them.”


Reuters