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Atletico Madrid

How Atleti Built a Team On a Foundation of Debt

Atletico Madrid’s evolution from Europa League winner to UEFA Champions League contenders under their Argentine coach Diego Simeone has earned them a valuable amount of respect.

Simeone has forged a focused and committed unit that is capable of disrupting almost any team in the world. Looking at their statistics, one can surely be very impressed from the way their results have turned out – taking four points from Real Madrid in La Liga this season and beating them in last season’s Copa Del Rey final, and recently eliminating Barcelona from Champions League. If Atleti’s flow of wins does not see any major upset, they surely look to clinch this year’s Spanish League title.

This, however, can’t be seen as a defiant victory for the little man in the face of the immense strength of Classico duo. Atletico do not deserve their billing as the people’s Champions, no matter how Simeone’s on-field turnaround merits credit. The Spanish capital club have come to represent, in recent years, something that is hampering the modern game of soccer: spiraling debts, third party ownerships and an abdication of responsibility.

In terms of revenue and support, Atletico remain the third biggest team in Spain, but have struggled to keep their own house in order since converting to a PLC in 1992. Atleti’s financial management has come under scrutiny ever since Jesus Gil became the chief shareholder.

This remains the club that has disregarded regulations and fiscal prudence throughout its modern history. They suffered relegation in 2000 not long after their offices were raided in the infamous Caso Atletico, which eventually led Gil to be sent behind bars for three and a half years as well as punishments for Enrique Cerezo and Miguel Angel Gil Marin – who remained at the club. The club stopped paying taxes for two years following relegation. In this way, they avoided around €46 million as they expedited their escape from the Segunda Division.

Atletico Madrid, by 2011, owed a scarcely conceivable €517 million to creditors – including almost €171 million to the tax authorities. The Spanish government could have threatened to call in the debt instead of offering them a 4.5% interest per annum while making Atletico pay €15 million of their tax bill every year.

The unfortunate economic meltdown in Spain, which has driven the unemployment rate to around 26 percent, provided Atletico the opportunity to alleviate their own predicament. Economics and finance professor Jose Maria Gay told Die Welt in 2012,

“The government cannot demand payment without crippling clubs and leaving supporters very upset.

“Considering the situation of our country is facing, it is unreasonable to start introducing dysfunctional steps into the championship that could affect its image, which has a commercial value.”

That rationale meant that laxity prevailed. The ex-president of Bayern Munich, Uli Hoeness, showed his frustration while referring to the EU bailout of Spain in 2012. He said, “This is unthinkable. We pay hundreds of millions to get them out of the sh*t, and then the clubs don’t pay their debts.”

Under Gil, not paying up their taxes was Atletico’s modus operandi. Although they have started paying out their debt now, in theory, they will have not paid what they owe until sometime early in the next decade. Instead of taking things seriously and living within their means, Atletico simply go on spending. UEFA temporarily withheld their prize money after winning the Europa League for breaching the Financial Fair Play regulations in 2012. Atletico were among the first teams to be hit by the Financial Fair Play although their punishment was eventually nullified. Hence, it is no surprise to see why they came under the radar.

Not long after selling Sergio Kun Aguero to Manchester City to stave off the tax man, a deal to sign Radamel Falcao was agreed with Porto, which was worth €40 million. It was simple that Atletico were unable to fund the deal themselves and so the Doyen Sports Group – a hedge fund – reportedly chipped in around 50% of the fees.

Falcao may have enjoyed a great time at Atletico but they never deserved to have him in the first place. They remained unable to afford him from within their means. But that did not stop them as Falcao was not the only one. According to one investigation in 2013, it was revealed that only six players from their first team were owned outright by the club. Despite the circumstances in which they remained, Atletico continued spending over €160 million net on transfer fees from 2002 to 2009. To get deals done for the top players in the world while holding so much in back payments smacks of astonishing hubris.

Even being assisted by Doyen in paying for Falcao, Atletico still failed to maintain their obligations to Porto. According to some reports, the Portuguese Club were on the verge of asking FIFA for a resolution when the Rojiblancos failed on their installments. Shortly after this complaint, Doyen’s name started appearing on the Atleti kit.

On the deal with the kit sponsors, Atletico are currently into their second agreement with the Azerbaijan tourist board – a deal that raised eyebrows. It paid a great €18 million for the first 18-month deal. The well-documented human rights abuses in that country stirred debate about the suitability of the sponsors.

Furthermore, it was also reported in 2011 that €52 million was owed by Atletico in wages to their own club staff. This comprised around 81% of their total pending wage bill. Playmaker Diego, during his last spell at the club, filed an unpaid wages complaint for around €59,000.

There remains a sense of stability at the moment around the Vincente Calderon ahead of the club’s move to the Olympic Stadium in 2016. There remains no doubt that the Atletico empire features a shaky foundation. For how long will Simeone stay? Will the funds be given to him to strengthen the team? Will their class performers like Aguero and David de Gea continue to be sold to gain some financial safety?

This will be Atletico’s last and final chance at home and abroad for a long period. They should convert it making the most of it because they have spent a long enough time living the high life while someone else definitely picked up the tab. Austerity looms on the horizon.

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16 Comments

16 Comments

  1. LSS

    May 7, 2014 at 4:12 am

    For the last years Atletico has done a lot of work to combat the debt. That’s why they have been selling players. And they’ve done some pretty good deals by bringing in players cheaply.

    They are doing amazingly well with a strict budget, while the two big teams are favored with better TV deals etc.

  2. LSS

    May 7, 2014 at 4:05 am

    Here’s some perspective:

    “Atletico Madrid’s budget is around €120m, whilst Barcelona and Real Madrid’s are closer to €500m. Atletico Madrid pay their players a reported total of around €66m. That places them between Hamburg and Sevilla in the rankings of what football clubs pay their players. For added perspective, Atletico Madrid’s average salary per player is just marginally larger than the likes of Fulham, Sunderland and Bolton Wanderers, and well under the amount Werder Bremen, Valencia and Aston Villa’s stars earn.”

    “And in stark contrast to the way in which Chelsea and Mourinho like to spend, Atletico Madrid’s first team in London did not contain a single player bought since Simeone took charge two and a half years ago. It cost a total of £39m – the player scoring Chelsea’s goal cost more than that alone, and he has barely produced anything approaching a return on that investment since.”

    Source:
    http://www.insidefutbol.com/2014/05/06/diego-simeones-atletico-madrid-put-joke-on-la-liga/139425/#XpsQksIV5OYk5mER.99

  3. Carpetano

    May 1, 2014 at 5:45 pm

    Can you provide any reliable source supporting this? Because honestly, it seems a mix of rumours and typical B.S. that can be seen on the Internet. For example: “According to one investigation in 2013, it was revealed that only six players from their first team were owned outright by the club”. What investigation? Who made it? Where are their conclusions? How is that it hasn’t been reported at any major media?

  4. AJ

    April 30, 2014 at 6:35 pm

    Um…you could probably make the title:

    How (insert any top flight club) built a World Class team on spiraling debt

    I honestly don’t think this is a special case. If you honestly think Barca, Real, City, United, or really any club in the Champions League actually lives within its means, I feel sorry for you.

    Good article, but I think this is the norm now.

    • siddharth dhruva

      April 30, 2014 at 9:12 pm

      If you talk about Real and Man United, Arsenal to that extent even Chelsea, they do follow the FFP rules and tax laws. England clubs are more strict than the others because govt. Favourtism is least in England.

      By the way,
      Manchester City and PSG are under FFP scrutiny this year and in may their verdicts will come but it is already told by Fifa that even if Man City violates the rules, they will be punished bt u wud stay in CL next season.

      • scott

        May 1, 2014 at 2:09 pm

        In defense of Man City and PSG, if you don’t owe money to a third party, you are not in debt.

  5. Jake

    April 30, 2014 at 1:41 pm

    I think we all know the well run prem clubs in regards to finances and spending.

  6. Jake

    April 30, 2014 at 1:38 pm

    Why has no one pointed out the irony in Uli Hoeness’ comments?

  7. Taylor

    April 30, 2014 at 12:42 pm

    Siddarth, please write more articles like this. Very insightful.

    • Siddharth Dhruva

      April 30, 2014 at 2:03 pm

      sure.. would love too

  8. Pakapala

    April 30, 2014 at 12:01 pm

    Wonderfully put.
    Although I don’t think people rooting for a team have to or ever take account of their financial situation though.

  9. Cody (#2)

    April 30, 2014 at 11:20 am

    Fantastic article. One of the best I’ve ever seen on WST.

    • siddharth dhruva

      April 30, 2014 at 12:29 pm

      Thank you for the appreciation..

  10. IanCransonsKnees

    April 30, 2014 at 11:08 am

    Very in depth, makes the Premier League look well run (ish).

  11. christian

    April 30, 2014 at 11:01 am

    Great article. Learned a lot.

    Cheers.

    • siddharth dhruva

      April 30, 2014 at 12:25 pm

      Thank you

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