Real Madrid News: Real`s Past Financial Illicit Deals Come Under FFP Scrutiny

  on

It has long been a mystery how Real Madrid and Barcelona have managed to make massive transfer deals year on year, especially since 2008 when the financial crisis hit around the world. Of course, we now know that countries in Southern Europe were particularly badly hit by the crisis, so it has always seemed a little strange that football clubs in those countries are still able to mount massive transfer bids. The clubs themselves point to their financial results, which appear to defy the plight of the rest of their country. However, having scrutinized their accounts for the last three years, both Real and Barcelona appear to paint a rosy picture, whilst the reality is that current debt levels are €590 million at Real Madrid and €578 million at Barcelona. Also, they both receive half of all the television deal money, whilst the rest of La Liga has to share the rest! How can that be Financial Fair Play?

In the case of Real Madrid, there has been a long running campaign regarding the suspected illicit state funding of the club. There have been attempts to get this matter investigated on several occasions, yet interestingly, the Spanish authorities have always seemed a little reluctant. Now, with the onset of FFP biting, the shady deals done by Real Madrid and the local Madrid council are being looked at by the European Commission. The outcome will be material to the EUFA FFP committee that rules on whether there have been any transgressions.

This revolves around a property deal between the local Madrid council and Real Madrid, whereby a piece of land was grossly undervalued by the council when selling it to Real. The same land was then valued at €22.7m in 2011, a 5,400 per cent rise, when the council decided they had to take it back. In lieu of a €22.7m payment, the club was given the land they needed to develop their stadium! A blatant case of financial chicanery, that basically meant that the state had funder Real Madrid’s transfer fund.

There have been comparisons with English Premier League clubs, but the comparisons have to be fair. Looking at a balance sheet, you do not just look at liabilities, but assets as well, to determine the success of the business. This is where the Spanish clubs fall down. The most recent results show us that the net assets of the clubs (in Euros) are as follows:-

Real Madrid  -141m

Barcelona      -226m

Arsenal            93m

Man Utd         545m

Looking at the above, you would be hard pressed if you were a bank manager, supporting any prospective transfer bids of £70m for Gareth Bale as has been reported in Marca, the Spanish sports paper.

Clubs like Manchester City and Chelsea will be watching closely, especially City, with their highly dubious deal with Etihad Airways for the stadium naming rights; a deal which is valued at £450m over ten years. Incidentally, this deal is also more contentious because there appears to have been complicity between members of the same royal household in Dubai, who own the respective organizations!

There does, at last, appear to be some light at the end of the tunnel and some form of level playing field (excuse the pun) for all clubs in all countries and an end to the era of reckless billionaires laundering money through football clubs, or underhand state help for the leading football clubs in their relative countries.