Photograph: Luis Gene/AFP/Getty Images
Article by Sid Lowe
According to article 93 of law 35, originally introduced by the previous Partido Popular government in 2004, foreign executives earning more than €600,000 (£540,000) a year are taxed at 23%, rather than 43%. In theory, the aim was to encourage talent to come to Spain: in practice, following a modification in 2005, it gave Spanish football clubs, already boosted by the collapse of the pound, a huge advantage. Of the 60 people who qualify for the lower rate of tax, 43 are footballers.
Beckham was the first beneficiary of the new rate, hence the informal name. Or rather Real Madrid were, as he had agreed a net salary. Another Englishman, Jermaine Pennant, reveals the practical implications: Real Zaragoza pay him £49,200 a week; an English club would have to pay £80,000 to match his net salary. Cristiano Ronaldo's current salary would cost a Premier League club €5m more than it costs Real Madrid.
Now, suddenly, that privilege is being removed. The consequences will be dire. "If the government want a substandard league …" warned the league's vice-president, Javier Tebas. Figures quickly emerged claiming that Spanish football generates 85,000 jobs and turns over €9,000m a year. The real cost to La Liga could be losing its hegemonic position, a "superiority" in which it revels.
"Objectively, Spanish football is the best in the world," announced the league's president, José Luis Astiazarán. "Spain won Euro 2008, Barça the European Cup, and our league's the best, superior to England." The arrival of Cristiano Ronaldo, Kaká, Karim Benzema and Zlatan Ibrahimovic last summer provided all the proof he needed. The best players in England, Italy and France had departed for Spain. More than €455m had been spent by Spanish clubs on transfers – a 72% increase, more than any other country. Ever.
But, insisted Astiazarán, those days could soon end. Never mind the fact that 43% still puts Spain's tax band below the 50% in the United Kingdom, revoking the Beckham Law will be the demise of the domestic game. "In a few years our league will be average because it won't attract the world's best," complained Tebas. "It is the end of the league of the stars." The law will be repealed from the new tax year but, at least, will not be applied retrospectively, so existing contracts are protected.
Tebas may even be right, and not only due to the Beckham Law, because beneath the glistening surface Spanish football is in crisis. According to José María Gay, Spain's leading expert on football finance and an adviser to Uefa: "La Liga is dying." The Osasuna president, Patxi Izco, admits: "I fear a financial meltdown." "Football," insists another director, "is seriously ill."
The €455m transfer spend disguises a troubling reality. Last year, despite winning the treble, Barcelona made only €8.8m and have a debt of €350m. Madrid signed €258m worth of players but only after their president, Florentino Pérez, turned to two friends who are both presidents of banks and who loaned Madrid €151.5m.
The argument is that their debts are serviceable. In fact, Pérez insists that high expenditure is necessary to generate money and Madrid have become the first club to take income beyond €400m. But doubts remain; costs outstrip income, shirt sales are lower than those of Liverpool and Chelsea; Bernabéu attendances are down 7%; and the debt stands at €683m. Publicly, Pérez insists: "Madrid must always remain a club owned by its members." Privately, the possibility of becoming a plc has been discussed.
But would that solve anything? The evidence suggests not. In the early 1990s, a new law obliged every club to become a plc, with four exceptions – Real Madrid, Barcelona, Athletic Bilbao and Osasuna, who were given special exemptions for socio-cultural reasons. Shares were issued and the slate wiped clean. It was supposed to be a panacea. The theory was simple: presidents would be more careful risking their own money. They were not. Often their fans would not let them.
"We're operating on a war economy," reveals one director, "but supporters don't see it like that. They just want to win." Jorge Pérez, the secretary of the Spanish Football Federation, admits that one director told him: "If I do a good job economically, we'll go down and they'll kill me." So he spent money he did not have. Only 8% of what football clubs spend on average can be covered by liquid assets.
Look back over the clubs who have competed in the Champions League recently and the situation is alarming: Valencia's debt is more than €600m. Like Real Madrid (who sold the their training ground for €447m to the council in 2001, wiping out their €278m debt), a property deal was supposed to be their salvation. However, the market crashed at just the wrong time. Now Valencia have two stadiums – one they cannot sell and another they cannot afford to finish building.
According to the third largest shareholder at Atlético Madrid, their debt is above €300m. Villarreal have just failed to pay their players for the first time because the ceramics industry from which their owner, Fernando Roig, makes his money has been hit hard by the crisis. Deportivo La Coruña are more than €120m in debt. Mallorca are desperately seeking a buyer and preparing for administration. Celta Vigo and Real Sociedad have been relegated and, with no parachute payment to break the fall, went into administration. Real Sociedad's president at the time was a certain Astiazarán, now the league's president.
"We need to avoid trying to compete with Madrid and Barcelona and sinking ourselves," says Ramón Monchi, sporting director at Sevilla. His club have been successful but there is concern, too: their success has been built on player sales, which requires continued success and a buoyant market. The latter has disappeared; the former depends on European qualification, hence last week's sacking of their coach, Manolo Jiménez.
In all, Gay calculates Spanish football's debt to be €3.5bn. The Spanish federation still owe the players' union €6.8m and, according to the former president of the union, Gerardo Movilla, an estimated €100m is still owed to footballers in unpaid wages. The state loses out, too: Atlético owe the tax man €15m; 50% of their transfer income is embargoed.
Michel Platini says there are five or six top-flight Spanish clubs in danger. Yet the danger is relative. The irony is that the lack of control also helps to protect the clubs from going out of business – in the short term at least.
As Spain's secretary of state for sport, Jaime Lissavetzky, puts it: "We need to be able to hand clubs yellow cards, a warning. But we have no coercive force. It's one thing taking the temperature, it's another handing out medicine." Even administration does not necessarily mean applying the brakes. While it is a last resort it is often a handy one, open to abuse. Unlike in England, there is no footballing penalty for going into administration.
The federal nature of the Spanish state, made up of autonomous communities, also offers a crutch upon which to lean. Madrid, Barcelona and Sevilla have all benefited from favourable property deals involving their local councils; Atlético plan to move to Madrid's municipally owned Olympic Stadium, selling the site upon which the Vicente Calderón stands to the council. Many clubs do not have that option: Sporting, Racing, Almería, Getafe, Deportivo, Málaga, and Valladolid all play in municipal stadiums.
Valencia have been propped up by Bancaja, their principal creditor, to whom they owe €220m and who, despite the club's mounting debt, backed a share issue to the tune of €95m. "Without them we would have gone down to Second Division B," admits their president, Manolo Llorente. Bancaja are a savings bank and they do not want to upset customers by sending their club to the wall. As one director of another savings bank puts it: "Clubs have an emotional power they use as a kind of blackmail." When Sporting Gijón went into administration, Gijón council bought their "brand image". As one insider puts it: "The council could not let us disappear; Gijón without Sporting is not Gijón."
Whether or not clubs go into administration, they can never compete with the big two. Remove Madrid and Barcelona and there was a 40% decrease in summer spending. Only five clubs spent over €5m. During the winter transfer window only three clubs spent anything. But how can you ignore Madrid and Barcelona? They are La Liga. That is the problem.
According to reliable statistics Madrid have 13.2m fans while Barcelona have 10.4m. Valencia are third with 2.1m. Nearly two-thirds of all football fans in Spain support one of the big two. And supporters of other clubs almost invariably choose Madrid or Barcelona as a "second" team.
The Madrid-Barça dichotomy is self-perpetuating. The media insist they are giving people what they want, that theirs is a business decision. The editor of one newspaper admits: "Every Madrid win is 10,000 more in sales." El País's match reports for Sevilla and Villarreal the day after the clásico contained a total of no words. The director of one television channel insists it would be a "disaster" for the channel if anyone other than Madrid or Barça won the league.
The dominance is felt most on TV – and that is the crux of the issue, the precarious foundation upon which Spanish football is built. Unlike elsewhere – and even Italy is going collective – Spanish clubs negotiate individual television deals. "The lack of a centralised deal is the biggest problem we face," Tebas says. The reason is clear. Madrid and Barcelona will earn approximately €120m in rights each year until 2013. Last season's third-placed side, Sevilla earn around €20m; Valencia, currently third, make under €30m – less than Portsmouth. Right throughout the league, the imbalance is extraordinary. Competing is impossible.
The problem is the league are powerless to impose a collective deal, although they continue trying. Just as their plans – announced last week – to impose salary cuts and wage limits on clubs can only get the go-ahead if the clubs themselves, and Madrid and Barcelona in particular, agree to them.
"It's not normal to have two clubs earning 15 times more," says Villarreal's Roig, "and it's going to be very hard to get the clubs to agree to change now. There's no unity, the league has a very difficult role. I'm not worried about Sheikhs [pumping money into England], I'm worried about our own organisation."
An insider at Sevilla adds: "The mentality of every club is always purely selfish and we're not sure that it would be beneficial for us [to campaign for change]. If we push for unity we might lose our position as the third or fourth biggest club: we could get closer to Madrid and Barcelona, but we would also see smaller clubs come closer to us."
Perhaps the most fearful remark about La Liga's "big two" problem comes from Sevilla's sporting director, Monchi. "Spain," he says "reminds me of Scotland."
In 2008, the then British culture secretary Andy Burham warned of the risk of the Premier League becoming too predictable. "In the US, the most free-market country in the world, they understand that the equal distribution of money creates genuine competition," he said. Spain provides further proof from the other end of the scale. But few see it and few debate it – after all, much of the media lives off the duopoly too.
One headline in Spain recently declared: "La Liga becomes the best in Europe." The "evidence" was two-fold: Madrid and Barcelona's place at the head of Deloitte & Touche's rich list; and the "big two" racking up more points than any other team in Europe. A closer read suggests the exact opposite. Madrid and Barcelona were at the top but there was not one other Spanish club among the leading 20 and their points totals – a record at both clubs – suggest that while they are good sides, maybe the teams they are playing against are not. Valencia, third going into this weekend, were 18 points behind. No other major league has such a gap.
"We need to recognise that the smaller clubs are necessary for the competition," says Roig. "After all, 15 clásicos at the Bernabéu and 15 at the Camp Nou would be a bit boring wouldn't it?"
Some of his counterparts believe it is already too late.
Eduardo Bandrés, a former president of Real Zaragoza, says: "This is the dullest league in the world."
I'd have to agree with this article. As wonderful players as Madrid and Barcelona have, I often find it hard to watch their games, because the outcome is so obvious in advance. The fact that they refuse to share television revenues doesn't really speak well for either club. In fairness, La Liga is hardly alone in being predicable- the Premier League anyone? Serie A?