Brussels probes “soccer bubble”

July 2011. Pursued and discredited for his links to the Gürtel kickbacks-for-public contracts scandal, Valencia regional premier Francisco Camps fires his parting shot by endorsing loans of 118 million euros to Valencia, Hércules and Elche soccer clubs. Drowned in debt, the three teams later announce they will not pay back the loans and the banks — Bankia, Banco de Valencia and CAM, all of which have cost taxpayers billions and now been sold or nationalized — demand payment, responsibility for which is taken on by the Popular Party-run regional government, the most indebted administration in the country.

Now the European Commission (EC), which has spent years collecting information about Spanish soccer, has opened a formal investigation into the three clubs, according to sources consulted by EL PAÍS, but also goes much farther. The whole system of loans to soccer clubs employed across different tiers of government — regional, provincial and municipal — is under the spotlight of the Competition Commission, which is headed by Spanish EC vice president Joaquín Almunia. Brussels does not want to reveal who it has in its sights, but if the aid is found to violate competition regulations or European treaties, it is possible that many clubs will end up having to pay all or part of the money back, which could spell their ruin.

The non-payment of tax and social security contributions, which has been habitual practice in Spanish soccer, even among the richest clubs, has also been under Brussels’ magnifying glass since last year. Almunia has informed the Madrid central government about the opening of this second line of inquiry, while the EC has sent questionnaires to the administrations affected to find out if any other state aid beyond the loans exists. “The Commission is analyzing that information,” Almunia told the European Parliament in mid-February, making it clear that soccer clubs “cannot receive different treatment from other economic agents.”

The sources consulted say this is exactly what has been happening in Spanish soccer. For years stadiums have been put up financed by soft loans endorsed by the administrations, and a wide array of grants has allowed the swelling of what Brussels terms “the Spanish soccer bubble.”

EC sources say the process may be delayed, but that the first decisions could be taken within a year. The only consolation for Spain is that it is not alone. The EC also has an investigation underway into five Dutch clubs, including the mighty PSV, that received over 10 million euros in public money.

Brussels’ argument is that these funds “distort competition,” as Almunia puts it. In practice, it says, some of these clubs can do with them what others can only do with what they have in their own pockets: buy players, build stadiums and, in short, not compete on equal conditions with the rest.

The investigation will come as worrying news for many clubs, given the precarious financial state of Spanish soccer. Having to pay back any money could spell the death blow for some. On the pitch, the prestige of Spain’s teams has never been higher, but there are real fears about the viability of many, as a KPMG report recently highlighted. With or without public grants, the bubble is enormous: Spanish soccer is dragging along a debt of 3.6 billion euros (600 million alone with the tax office), according to the Higher Council of Sport.

Now Brussels has the say.