Has La Liga been caught offside?

Spain's professional soccer leagues directly and indirectly employ around 65,000 people, and generate one percent of the country's GDP. But behind the glamorous façade of Spain's world champions, La Liga's Ronaldos and Messis, along with Europe's two richest clubs, Real Madrid and Barcelona, is a darker story of mounting debts that threaten to sink many teams, and which prompted this month's strike involving 1,000 players from all 42 first and second division sides that wiped out the opening weekend of the season before talks between the union and the Professional Football League (LFP) produced an 11th-hour agreement on Thursday.

The numbers speak for themselves. There are some 200 soccer players in Spain who are owed substantial back pay, according to the Association of Spanish Footballers (AFE), the labor union that has called the strike. The clubs owe their players a combined 50 million euros. This has been the main reason for the strike, and one that has brought multi-millionaires out in support of the journeymen making a living in the lower reaches of the Segunda División, but that figure is barely the tip of Spanish soccer's debt iceberg. By the end of last season the total amount owed by first and second division clubs was a staggering 3.5 billion euros, according to economist José María Gay.

There are still no figures available for this season, but everything points to a worsening situation. The economic crisis has hit sponsors hard, further reducing many clubs' income. And it's not just the small fry who are struggling. Teams of the caliber of Sevilla, Valencia, Atlético Madrid and Villarreal, big names from the top flight of Spanish soccer, are also in big financial trouble.

There has been a sharp increase in clubs taking advantage of 2002 solvency legislation to avoid having to declare themselves bankrupt. The first club to do so was Las Palmas, which has allowed it not only to renegotiate its debt, but to avoid automatic relegation.

A further 21 clubs have since followed suit, with a further 13 under administration. Among them are three sides playing in the first Division: Rayo Vallecano; Racing Santander; and Zaragoza, which has debts of 134 million euros. The government is currently looking into changing the law so that clubs taking advantage of solvency legislation do not wriggle out of being relegated in the process.

"Only a little while ago the Romanian federation sent out a letter to all of its players telling them not to sign any contract unless it was perfectly clear. They were saying don't go to Spain - there's no money there," said Luis Rubiales, the head of Spain's Association of Football Players who previously played for Levante, a Valencia-based club which is also insolvent. "I'm not very optimistic because, just as in Spanish society, the solution only arrives when something has already happened."

Zaragoza has shown considerable ingenuity in trying to avoid collapse through financial chicanery. Thanks to a secret slush fund put together by the club's president, Agapito Iglesias, the theoretically bankrupt Zaragoza has been able to sign Benfica goalkeeper Roberto this summer for a princely 8.6 million euros.

Atlético, which owes 200 million euros, has signed Falcao from FC Porto for ¤40 million. According to club president Miguel Ángel Gil Marín, "for the moment" there is no more money, but he hasn't ruled out finding some cash in the future. These kinds of funds are legal, just, and are highly profitable in the short term, but they also help to artificially inflate the market.

This may be why, although the Spanish transfer market is not as buoyant as it was five years ago, the clubs have spent 329.9 million euros between them this summer on new signings, according to specialist website Transfermarkt. After Italy and England, Spain's league is the highest-spending in Europe, and has seen three of the costliest signings this year: Falcao, Coentrão (Real Madrid paid ¤30 million for the Portuguese player, 20 percent of whom belongs to an investment fund), and former Arsenal midfielder Cesc Fàbregas, who cost Barcelona 29 million euros.

But Spanish soccer's high-spending days are over; all agree that the model is not sustainable. La Liga doesn't make as much money as England's Premier League, and the cake is much less evenly divided. Although television rights have multiplied 16-fold since 1990, bringing in some 600 million euros a year, almost half that amount goes to two clubs: Real Madrid and Barcelona. Among the major European leagues, Spain's is the only one where clubs must negotiate television rights independently in an every-man-for-himself system. This makes it even harder for La Liga's middle classes to compete with the sport's twin aristocrats, explaining in part the generalized stampede toward bankruptcy.

New Uefa regulations due to come into play in 2014 will limit the ability of owners to subsidize losses incurred by paying high transfer fees and salaries, making them only spend what they earn from soccer-related income if they want to play in European competitions. Owners can cover losses up to $88 million over an initial three-year spell, starting in 2012. Chronically indebted Mallorca last year became one of the few teams to be banned from a Uefa competition because the club had entered administration.

Given the current situation, it is hardly surprising that the players have decided that enough is enough, and have taken drastic action. Unless agreement is reached soon, what is supposedly the world's finest league could well find itself offside.