Club's spending spree sets a bad example

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(China Daily)
Updated: 2009-06-12 09:06

MADRID: Real Madrid's transfer market spending spree will inflate prices and wages and sets a poor example in a sport struggling with debt mountains and dwindling revenue in the deepest global recession for six decades.

Club's spending spree sets a bad example

Manchester United's Cristiano Ronaldo gestures towards the Reading fans after scoring during their English Premier League soccer match at the Madejski Stadium in Reading, in this January 19, 2008 file photo.[Agencies]

Real president Florentino Perez kicked off his latest raid for the world's best soccer players with the signing this week of Brazilian Kaka for around 67 million euros ($94.5 million).

He is targeting other leading players including Cristiano Ronaldo and Franck Ribery.

The construction magnate plans to finance his self-styled "spectacular sporting project" by adding to the club's debts of more than half a billion euros and the impact on Real's domestic and European competitors will be far-reaching, analysts said.

Transfer prices and wages for the very best players will surge and the inflationary effect will ripple down through the market, according to Angel Barajas, a professor of finance and accounting at the University of Vigo and an expert on the economics of soccer.

Perez, architect of the "galacticos" project during his first stint as Real president that snared David Beckham and Zinedine Zidane, says buying the biggest stars more than pays for itself by bringing in extra income.

"You pay a lot for the players because they give it back with interest," Perez's director general Jorge Valdano said in a television interview on Wednesday.

But Barajas noted that a severe recession was not the right time to be spending huge amounts and committing to paying colossal wages over a number of years, particularly as it was becoming increasingly hard to boost earnings.

"You have to bear in mind that soccer is close to maturity as a business and that implies that it is getting harder all the time to generate revenue," Barajas said.

"It seems that pressure to win trophies is pushing (Real) to pursue such an extremely risky policy."

A study published in April by Barcelona University professor Jose Maria Gay showed the combined debt of the 20 clubs in Spain's top soccer league swelled by more than 650 million euros to at least 3.5 billion in the year through June 2008.

Gay warned that the Spanish soccer faced a real threat of financial collapse and urged the authorities to act to force clubs to stop living beyond their means.

Reuters