Spain's top league facing financial meltdown - accountant

Spanish football faces the real prospect of financial collapse unless something is done to stop Primera Liga clubs living beyond their means, according to a leading academic accountant.

Jose Maria Gay, a professor at the University of Barcelona, spent the second half of last year analysing the 2006/07 accounts of the 20 clubs in the top flight and concluded the way most of them are run needed to be radically overhauled.

Only five, including Real Madrid and Barcelona, were able to end the accounting year with a surplus, where operating income exceeded expenditure, and the rest survived partly by tapping into one-off income sources such as selling off real estate, Gay's analysis showed.

"The insolvency of Spanish football is looming on the horizon," he told Reuters.

"I believe several clubs will have no other choice but to seek protection from their creditors.

"Their income will diminish, cash from television deals will not be pouring in the same volume it has up to now. Costs will eat up income and debts will spiral."

Gay's study throws the plight of Spanish clubs into sharp relief at a time when the nation is mired in its worst recession in half a century and the global financial crisis has restricted access to credit.

Spanish football officials have acknowledged the gravity of the situation. Javier Tebas, a vice-president of the Spanish football league (LFP), said in November he was "very worried" about club finances, especially second tier sides.

"The ones most at risk from the crisis are the small and mid-sized clubs," he told Reuters.

"I don't see the big clubs being affected so much as there are always important companies that want to use them to drive their advertising campaigns." Gay's calculations showed that the combined debt of the 20 clubs in Spain's top league in 2006/07 was €2.78 billion ($3.6 billion).

About 40 per cent of those debts were short-term loans and many clubs were not earning enough in the season to cover them.

Too many clubs had been relying on extraordinary income from the sale of players or real estate to keep their heads above water.

In the 2006/07 accounts, that income was worth €145 million to the 20 clubs, almost enough to wipe out the total shortfall of €155 million and leaving a combined pre-tax loss of €10 million.

But with the economy contracting, Gay said it would be ever harder for clubs to tap into one-off revenue sources.

"The player transfer bubble is deflating and the real estate market is in free fall," Gay said.

"The glorious era of massive windfalls and squandering cash is coming to an end. The panacea seems to have dried up."

Asked what action was needed to address the situation, Gay said the economic model most clubs used, introduced by the government in the 1990s, needed to be completely overhauled.

The majority of professional clubs are so-called sociedades anonimas deportivas (SADs), or sporting limited companies.

A few, like Real Madrid, Barcelona and Athletic Bilbao, are still run as sports clubs, with thousands of members (socios) as owners rather than a small group of shareholders.

The traditional sports club model, where the board of directors has liability, would seem to be the only solution to the financial woes of Spanish football, he added.