Spanish soccer teams in the past decade or so have spent ungodly amounts of money to hire players, coaches etc and to pay for them. You may wonder where they got the money from: generous patrons? They were bringing in such good profits investors flocked to their banner? Of course not.
Spanish teams of the first two divisions are currently 5 billion euro (a staggering 0,5% of the Spanish GDP) in debt. The teams owe 1 billion to the Kingdom in unpaid taxes and other duties but, as in other European countries, the government “aknowledging the social importance of sport” has taken a very permissive approach. The “final” date to settle taxes has slip to 2020 but teams won’t have to pay a dime until 2015. This is the approach first adopted by Italy and now spreading all over the Continent. Try not paying your business taxes and then “negotiating” with the State to pay them starting 2015 and see how far you’ll get.
The remaining 4 billions are owed to various Spanish banks, from Santader down to the various Caixas. It was obvious from the beginning the banks were never going to see any return or, to be more honest, they were never going to see their money back. Sport is a money pit financially speaking, as Honda learned so painfully in 1968. Again banks justified their ridiculous exposure by citing the same reasons as the government “the social importance of sports”. It’s more likely they had just drank the housing boom Kool Aid and felt invincible. With all those people buying houses at record prices who was going to miss a few billions? Of course banks are not making any move to to regain that money. It was more or less “given away”. People working in the banking establishment are not the sharpest knives in the drawer as we all know.
Of course the rest of Europe just could not sit down and watch the Spanish get all the good players and coaches. The sums spent are simply staggering and despite the current economic crisis show no signs of slowing down. Recently an Italian team was offered 43 million euro for a single player by Paris Saint-Germain. Where PSG gets all that money at a time when credit is becoming scarcer and more expensive despite record low interest rates? You guessed it. And it’s because of the “social importance of sports”…
Soccer epithomized everything that’s wrong with Europe right now. Everything is grossly overpriced because of government intervention and banking distorsions. While real world economical activities go down the drain because they are denied credit or cannot afford it, soccer (like housing in countries such as Italy and France) keeps getting money despite being the proverbial money pit.
Panem et circenses anyone?