Scandal signals the Spanish inquisition
Posted on July 16, 2016
OVER the past eight years, while its football clubs have stood astride European football, Spain has been dealing with horrendous financial problems. The country has been a Eurozone problem child, but at the same time, Barcelona, Real Madrid, Atletico Madrid and Sevilla have all enjoyed considerable success – the past three seasons, for example, have seen Spain sweep-up all major European club competitions. Added to the national team’s triple crown of 2008, 2010 and 2012, we have got used to Spain leading the way.
But at the start of July, the European Commission ruled that a number of preferential loans to clubs and dubious property deals represented unlawful government assistance for a select band: Barcelona, Real Madrid, Valencia, Athletic Bilbao, Osasuna, Elche and Hercules were all beneficiaries of state aid that gave them an unfair advantage over their La Liga stablemates.
The European Commission has ordered the Spanish authorities to claw back up to EUR 70m worth of loans, tax benefits and property deals. “Using taxpayers’ money to finance professional football clubs can create unfair competition,” said the Commission’s Margrethe Vestager.
There’s also a big moral question to be answered too. Real Madrid and Barcelona are ranked the top two clubs worldwide when it comes to football finance, and the pair spend millions on new players each year.
The European Union said Real has to return EUR 18.4m to the city of Madrid for an overvalued land swap. Real’s old training ground, which was in the area that is now the financial centre, was used as the location for three enormous skyscrapers, with the club receiving a larger plot on the outskirts of the city. The value of that land was re-evaluated at EUR 22.7m in 2011 instead of a 1998 estimate of EUR 595,000.
Real have commented that the valuation was legal and objective. In an official statement, the club also hinted at conspiracy: “It is a surprise that the European Commission have used a valuation made by an architect’s office in Barcelona to dictate their decision when said firm has little experience in making similar estimates in general and almost none in the city of Madrid.”
Spanish football officials argued that the tax treatment of clubs reflected the fact they were not profit-seeking enterprises and had been banned from paying dividends in the manner of a regular listed company. Since the start of 2016, clubs have had to pay the same rate of tax as companies, currently 25% in Spain. Real Madrid, Barcelona, Bilbao and Osasuna were the only clubs allowed to remain member-owned after a 1990 law that obliged most clubs to become limited companies.
While the enquiry focused on the inequality this created in Spain, there was little mention of the impact on European football in general. The Commission admitted that, “Professional football is a commercial activity with significant money involved and public money must comply with fair competition rules. The subsidies we investigate in these cases did not.” However, it would be interesting to hear how UEFA views this affair. After all, advantages gained domestically also have a knock-on effect on the performance in Europe of both Barcelona and Real – do they not?
With Lionel Messi also in the dock and suspect state support for selected Spanish clubs, the reputation of Spain has been severely dented. They should manage this carefully, for Italian football’s decline can be partly attributed to a string of scandals over a number of years. After a period of unprecedented success for the nation, against a backdrop of economic decline, mass unemployment and regional unrest, the distractions provided by football may have lost some validity.