Spanish clubs face uncertain new year

Christmas festivities are much the same the world over these days, but not in Spain.

The Spanish still jump over bonfires, they still throw flour at each other and on the Day of Holy Innocents they still play the old practical jokes: the coin glued to the pavement, the sugar swapped for salt, the clock put forward one hour and of course the hoax news report that has everyone up in arms.

Innocents Day is next Saturday but this year the story came early, and it wasn’t a hoax.

Real Madrid, Barcelona, Athletic Bilbao and Osasuna all face investigation by the European Commission, accused of receiving illegal state aid in the form of reduced taxation. Three other clubs, Valencia, Elche and Hercules, face a similar charge because of bank loans guaranteed by the regional government over the past four years. And a land deal 15 years ago between Real Madrid and the city authorities is now being questioned because of alleged false accounting.

Reaction in Spain over the past few days has gone from outrage to disbelief to accusations of conspiracy, above all from the two big clubs. Barcelona were already under scrutiny because of Lionel Messi’s unpaid tax bills and the financing of the Neymar transfer in the summer. Over the past few days Real Madrid have been furiously denying allegations that Gareth Bale’s record-breaking move was partly financed by a loan from one of the banks propped up by the Spanish government.

“A campaign against Spanish football” is how Madrid president Florentino Perez describes it. Spanish foreign minister José Manuel García-Margallo has said he will “battle to the end in defence of Spanish clubs, which are part of the brand of Spain”.

The irony with this conspiracy theory is that it has taken the European Commission four years to move since the first complaints were received. The delay became so obvious that it provoked a further complaint to the European Ombudsman, Ireland’s Emily O’Reilly, elected only last July. Joaquin Almunia, the European Commission vice-president and Competition Commissioner, has been forced to act because of O’Reilly’s intervention as she has more or less accused the Spanish official of sitting on the case.

“The Commission has failed to act on this complaint for more than four years,” O’Reilly said last week. “Not only is this bad administration, but to the European public it can look like a conflict of interest given the Commissioner’s strong links to one of the football clubs in question.”

Almunia is a Basque politician, and life-long supporter of Athletic Bilbao. Athletic’s ownership structure and finances are now in doubt because they, like Madrid, Barcelona and Osasuna, are controlled by their members. All four clubs were exempted from a requirement to convert into limited companies and thus pay less tax.

Madrid’s 1998 land deal is in a category all of its own as it also involves an apparent manipulation of the market. The club were given Las Tables, an area of land valued at €595,000 by the City of Madrid, as a form of payment in 1998. When it was taken back into control of the council in 2011 it was valued at €22.7 million, allowing the authorities to give the club other land vital to the development of its hotel and shopping mall in lieu of payment.

Potentially all seven Spanish clubs could find themselves in serious trouble next June when the Commission is due to report. Who exactly is behind these complaints has not been disclosed — those responsible are described as “a group of investors in European football clubs”. The Spanish media suspect the Germans, specifically Bayern Munich. There have also been allegations from Dutch euro MPs. Several Dutch clubs, among them PSV Eindhoven, have themselves been under investigation.

But how far the European authorities will pursue this has to be in doubt. Apart from the politics, the Commission is currently planning to extend what is known as the General Block-Exempton Regulation. The GBER makes it possible to grant state aid in designated fields without need to notify the Commission, and it is proposed to make sport one such exemption.

Florentino Perez and his friends could yet escape with their reputations intact.

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