Sam Wallace: Old elite are in as much danger from financial fair play as the nouveau riche
Talking Football: Imagine the storm if the right granted to Real Madrid and Barça was given to Manchester United and Arsenal
After Real Madrid’s victory in the 2000 Champions League final, a supporter of the club who identified himself then as a 43-year-old European Union official living in Brussels wrote to the newspaper El Pais to convey his joy at the club’s eighth European title.
In the letter published in the newspaper on 14 June 2000, he described how after the match, in a state of some emotion, he placed a Real “Campeones” flag on the balcony of his Brussels flat. To some eyes, it looked uncomfortably like a reference to the Spanish phrase “poner una pica en flandes” – literally “putting a pike in Flanders” – which refers to the Spanish occupation of the territory in the 16th and 17th centuries.
Not in the best taste, but given the individual’s euphoria and the memories he said it brought back of his childhood, perhaps it was understandable. The letter was written by Cecilio Madero Villarejo, who still lives in Brussels but has a better job than he did 13 years ago.
These days, Madero is one of the four men who make up the directorate-general at the European Commission under the leadership of commissioner and fellow Spaniard Joaquin Almunia, whose job it is to enforce the rules on big business, from anti-trust, to mergers and, of course, state aid.
It is Almunia’s office which will have to make the decision on whether Real are guilty of receiving illegal state aid over a 2011 land deal with Madrid City Council which, as The Independent revealed last week, is under investigation by the EC.
It should be made clear that there are no allegations of favouritism against Madero or any of the members of the commission’s directorate-general. Indeed, they have made it very clear that they intend to stand shoulder-to-shoulder with Uefa president Michel Platini in creating a level playing field where, as they said in a joint statement last year, “no operator is given special advantages by any layer of the government”.
Still, 16 months after receiving the initial complaint about the deal which saw Madrid City Council pay €22.7m to Real for a piece of land it had handed over to the club 13 years earlier at a value of €421,000 – the crux of the state aid allegations – we are still waiting for a decision.
On Thursday, El Pais reported that the estimated value that Real realised from its 2011 agreements with Madrid City Council was €200m in total. The land packets exchanged between the two parties were of equal area but those received by Real, where they intend to build a hotel and mall complex by Paseo de la Castellana, are worth much more than those the council got in return.
The ramifications are enormous. If the commission waves it through then it sets a remarkable precedent that would permit councils to sell football clubs public land and then reimburse them for that land at an extraordinary cost. Perhaps Chelsea should look beyond Earls Court and set their sights higher for that new stadium. Holland Park?
Uefa financial fair play, which Platini wants to work in harmony with EC state aid legislation, was never going to be as simple as regulating Russian oligarchs or Middle East oil dynasties. Suddenly it is looking a bit dangerous for the old elite as well, especially across Europe’s football community where relationships between clubs and government, local and national, vary dramatically.
While in Madrid the council appears to work closely with its most famous club, the situation is very different in west London. Chelsea’s attempts to expand Stamford Bridge have been consistently frustrated by their local authority, Hammersmith & Fulham Borough Council, which has regulations that restrict the stadium’s capacity on Champions League nights.
How does FFP regulate those kind of relationships? How does it ensure that the advantages which are not expressed directly on the balance sheet in transfer fees or wages are enjoyed by all clubs? Stadium infrastructure is exempt from FFP spending, but the bigger picture is that FFP adopts a zero tolerance to state aid of any kind.
These are the kind of challenges that emergent clubs like Manchester City, Chelsea and even Tottenham Hotspur are up against when they seek to compete with the old order. Spurs sold Luka Modric to Real last summer, and may yet end up selling them Gareth Bale one day. Spurs are also a club who have been obliged to clear considerably more obstacles in building their new stadium than Real encountered in their 2011 land deal with Madrid City Council.
Another curious thing about Spanish football is the legislation that came into force in 1992 that all clubs bar four – Real Madrid, Barcelona, Osasuna and Athletic Bilbao – must convert to the plc structure. This too is the subject of an EC investigation. The four exempted enjoy advantages conferred on not-for-profit organisations, not least being spared from paying corporation tax in full.
Factor in the property deals that Real did on the development of their former training ground Ciudad Deportiva and that becomes a very significant advantage. Imagine the storm that would ensue if the same advantage, the right to constitute themselves legally in a different way, was given to Manchester United or Arsenal.
Then there are the bigger questions. When you consider that Spain’s last unemployment figures in January had more than 55 per cent of 16- to 24-year-olds out of work, this is not a country that can afford tax breaks to institutions as wealthy as its leading football clubs. That is before we get to the bailout the Eurozone gave Spain last year.
The investigation into the 1992 legislation will come too late for some, like Valencia, around £340m in debt and effectively bankrupt. Their president, Manuel Llorente, resigned on Friday, ironically over a dispute with local government. Before the 1992 legislation came into force they were debt-free. A cabinet minister in the Spanish government at that time? Joaquin Almunia. As if any further evidence was required that these are not problems easily solved.
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