LA LIGA'S APPROACH TO BASIC ECONOMICS

It seems it's not only Barcelona and Real Madrid who can afford to splash the cash, whether clubs *actually* have that money in the bank or not is quite another matter... 

Sadly in this current climate of financial hardship the world finds itself in, most of us are now well versed on the importance of living within our means and ensuring that whatever goes out is offset by a greater (or at least equal) amount coming in. Those of us who for whatever reason find ourselves in the red, quickly come to realise that austerity is a crucial component to survival-a run in with a debt collecting agency for example will quickly instil this respect for solvency in us.  Basic economics, right?

Well you’d be mistaken to think that financial creditability is simply measured in terms of surpluses and deficits everywhere. For there is a magical place where over zealous spending is not only free from punishment but is effectively encouraged.

I speak about Spain of course, more specifically the confines of Spanish football. From this curious realm of illogicality, clubs that adopt a frugal approach to purchasing are more often than not the ones who suffer, while those who prefer to burn holes in their pockets are allowed to do so with very few repercussions.

In contrast to any other European league, in Spain defaulting does not carry with it the penalty of not being able to compete. So why even bother hiring an account?

Let’s look at Zaragoza’s acquisition of Ikechukwu Uche, which highlights this bizarre relationship between contract law and football. The Nigerian international was signed from Getafe in 2009 for a reported €5.5 million, which was to be paid in three instalments. Getafe only received the first payment, effectively selling the player for roughly €2 million.

Appeals by Angel Torres, Getafe president, to either have the Romerada club go into administration, as would happen in any other major European league, or for his club to be compensated with players of equal value to the amount outstanding, were met with resounding silence from the LFP.

The Madrid club was forced to remain a creditor to its league rival and could only renegotiate their so-called “agreement”, while Uche continued to strip out for his new employers.

Getafe is by no means the only club enraged by Zaragoza’s actions. At least Torres’ team remains in the top division. Unlike Deportivo la Coruña, who’s valiant efforts to keep their heads above water, both financially and in terms of league status, were met with failure. Although it can boast creditworthiness, bitterness must be the over riding feeling for the Galician club as Zaragoza who, according to Coruña president Augusto Lendorio also owe his side money, fight another season in La Primera Liga.

But Zaragoza is not the only offender in this debacle. When it comes to balancing the books, the general mentality of Spanish clubs is totally warped. 22 clubs in the top two divisions have filed for bankruptcy, Santander the most recent. Of the three promoted teams to La Liga this season (Rayo Vallecano, Real Betis and Granda), not one can claim financial soundness, which is rather telling of the problems that both leagues face, from a credibility stand point.

Professional football clubs in Spain are in arrears of  €4 billion. This frightening statistic could probably be expressed more eloquently but the impact would be compromised. And is it any wonder, when you consider that, in contrast to any other European league, in Spain defaulting does not carry with it the penalty of not being able to compete. So why even bother hiring an account?

Well unfortunately much like the figurative bursting of construction bubble, which has devastated the Spanish economy of late, this particular state of delusion will eventually have to come undone as well.

Real Mallorca has already felt the wrath of UEFA’s financial criteria in this respect. The Palma team finished the 2009/10 season fifth, thus earning a place in the Europa League. However, due to the unresolved matter of €2 million which was owed to a rather disgruntled Athletic Bilboa for a certain Atriz Aduriz (who had signed for Mallorca two years previously) Villarreal was instead called upon to take the coveted European spot. Despite the inevitable protests that followed this decision, UEFA’s requirements were clear: clubs that withhold money from other clubs are not eligible to compete in the competition.

Not vying for European glory is not the only consequence of poor budgeting, however. Not settling your transfer fees in a timely fashion is one thing. Not paying your overheads is another. And just like any other business, football clubs’ electricity and gas bills pale into insignificance when compared with their wage bills.

This year’s season got off to a no start as the players’ association (AFE), along with 110 players, announced a strike. Their grievance related to wages of course.  Over 200 of the professional players making up the 42 teams in Spain’s top two divisions, or 20%, were aggrieved owing to contracts not being honoured.

The LFP, which the season before put aside a guarantee fund of €40 million for such circumstances, came under scrutiny by the AFE for not taking the issue of late payment seriously enough. The matter was resolved in time for match day two with an increase to the parachute fund of €10 million and reassurance from the governing body that club/player agreements would be treated with the legal weight they deserve.

All well and good, but from an outsider’s perspective this farce can only be seen as damaging for the leagues’ credibility. And how can much can players really trust assurances from a league body which allows roughly 50% of it’s clubs to essentially play while broke?

Surely the equal distribution of TV money will have to be properly considered if Spanish football is to weather this current financial storm. The true nature of the competitiveness of the league is basically a joke now. Even with the realms of possibility stretched to their furthest capacity, any chance of a team outside the top two winning being crowned champions is laughable-let’s just assume Levante will eventually drop off at some stage this season. The simple fact is that the dispersal of image rights, or the lack of it, is creating a massive gulf between “the haves” and “the have not’s” in Spain. Top dogs, Barca and Real Madrid, reaped a staggering €140 million this season in telly rights alone, while their closet rivals (for want of a better word) earned a pittance in comparison: Atletico Madrid 42 million, Valencia 40 million and Villarreal €33 million. Below these teams the other 15 scrap it out for the remaining €205 million.

The effects of not having a system of collective bargaining in place, and allowing the disproportionately steady growth of two giants to continue without any attempts of halting it, are already apparent.

Formerly big clubs are no longer able to attract or hold onto the big names they once could. Just look what happened this summer where with the exceptions of Real Madrid, Barca and Malaga La Liga witnessed a mass exodus of some of it’s finest players: Atletico lost Forlan, the Kun and De Gea, Valencia waved goodbye to Juan Mata and David Silva, Villarreal had to depart with Cazorla and Valencia could only watch as Malaga ransacked it’s dressing room of Joaquin and Isco.

The current TV deal expires in 2014. Until then fingers need to be crossed, candles lit and prays answered to ensure that the disparity between clubs doesn’t grow even more excessively out of control.

To read more from Des you can read his excellent blog here