I don’t understand these wages.
No other club pays those kind of wages and it’s not like they’re an newly minted club having to overpay to convince players to join.
What on earth was / is going on at Barca?
Real Madrid’s transfer conundrum and what it means for Varane, Hazard, Mbappe and Odegaard
Dermot Corrigan 4h ago
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A Zoom call last week between international journalists and
La Liga president Javier Tebas was dominated by the issue of whether Barcelona’s troubled finances meant they would not be able to re-register Lionel Messi even if he agreed to a huge pay cut.
For a change, one reporter asked whether the situation at Real Madrid was similar — if they had not been able to keep Sergio Ramos this summer due to comparable economic woes of their own.
“Real Madrid’s situation is very good, after the pandemic, because of what Madrid have done when they reach certain situations,” Tebas responded. “Fernando Hierro, Iker Casillas,
Cristiano Ronaldo — and now Ramos. Real Madrid have managed the pandemic extraordinarily well.”
The positive tone of Tebas’ response was a little surprising, given he had earlier admitted to a difficult relationship with Madrid president Florentino Perez, but the admiration in his voice for how the construction magnate has managed to protect his club was clear.
This is not to say Madrid’s finances have not been seriously stressed through the last two years. Perez himself said at December’s AGM that the pandemic “was ruining us”, and he regularly stated how awful Madrid’s finances were during April’s completely mishandled push to start a European Super League.
The COVID-19 pandemic arrived just as Madrid were taking on a €600 million renovation of their Santiago Bernabeu stadium. The loss of ticketing, sponsorship and match-day revenue put a €300 million hole in their finances for the 2020-21 season and there is uncertainty over when their revamped stadium will be ready to use.
“Barcelona’s situation is so chaotic that Madrid’s has not been noticed as much,” says a source. “But it is not much better. Florentino said it openly when he announced the Super League. The pandemic has done a lot of damage to Real Madrid.”
Ramos’ glittering Real Madrid career has ended with a free agent move to Paris Saint-Germain (Photo: Stuart Franklin – UEFA/UEFA via Getty Images)
So both of La Liga’s big two were very badly hit when all match-day revenues dried up completely. However, the underlying situations at each was very different, as were their reactions and potential for manoeuvre and cutting costs. Barcelona, under now-former president Josep Maria Bartomeu, had allowed their finances to get out of control due to overspending on transfer fees and especially wages. Madrid, under Perez, had run a tighter ship.
This means they are in very different situations this summer.
The constant speculation that Madrid might offer €150 million-plus for Paris Saint-Germain striker Kylian Mbappe remains far-fetched — but, unlike their arch-rivals at the Nou Camp, there is no need for a fire-sale of assets.
La Liga’s salary cap is why
Barcelona are currently unable to either register their four new signings or re-sign Messi, even on much reduced terms. Madrid, of course, also have to comply with these strict financial controls, which have caused significant pain over the last few years.
Before the pandemic, the two clubs had very similar wage limits — in 2019-20, Barcelona’s was just slightly higher (€671 million to €641 million). While Barcelona’s was almost halved to €347 million for last season, Madrid’s fell significantly too, although not so far, to €473 million.
This is because Perez and his board were better able to adapt to the circumstances. Madrid’s budget for 2019-20 was to be €822 million but ended up as €715 million due to the pandemic. The official figure in the club’s budgeted accounts for 2020-21 was €617 million — a further blow but again, the situation was not nearly as dramatic as at Barcelona.
While Bartomeu’s board were indulging in accounting tricks such as the Arthur Melo/Miralem Pjanic swap deal with Juventus last summer, Madrid raised around €100 million by unsentimentally cashing in on very promising young talents including Achraf Hakimi,
Sergio Reguilon and Oscar Rodriguez. They also lowered their wage bill by getting Gareth Bale back to
Tottenham Hotspur on loan, and allowing James Rodriguez to join
Everton on a free transfer. In January, they cut costs again by loaning out two more little-used squad players in Martin Odegaard and Luka Jovic.
The Bernabeu board have also been much more successful than their Catalan counterparts in ‘persuading’ their club’s players to help deal with the financial situation.
Antipathy towards Bartomeu and his board meant any negotiations over money were difficult. Although the relationship between Perez and senior dressing room figures at Madrid has not always been very friendly, the club’s director general Jose Angel Sanchez played a key role in negotiating pay-cuts of around 15 per cent across the squad.
Madrid’s players also ‘voluntarily’ gave up their bonuses for winning the 2019-20 La Liga title and Spanish Supercopa, saving the club around €30 million. The club’s directors and senior executives also took similar pay cuts, while several well-remunerated executives left for other jobs. Madrid’s ratio of salaries to income was also kept at 57 per cent — well below the 70 per cent figure recommended by UEFA, while Barcelona’s was spiralling well over 100 per cent.
It was pretty outstanding work in the circumstances and meant that the accounts presented at last December’s AGM showed a modest profit of €300,000.
“Real Madrid have suffered two very tough years,” Perez said on Spanish radio last month. “In two years we have not brought in €500 million (that we otherwise would have). The generosity of the players has allowed us to be in a satisfactory position, considering what we have been through.”
Such belt-tightening has, of course, affected the competitive level of the team.
Their last big splash on signings came pre-pandemic, in the summer of 2019, when over €250 million was spent on Jovic, Eden Hazard, Eder Militao and Ferland Mendy. The following January, another €30 million was invested in Brazilian teenager Reinier Jesus, but since then nothing has been spent on transfers, through three blank transfer windows when the only ‘new signings’ were players returning from loans.
This lack of strengthening led directly to shortcomings in Madrid’s squad, shown clearly during 2020-21, especially during a mid-season injury crisis.
Coach Zinedine Zidane arguably did a phenomenal job in reaching the
Champions League semi-finals and keeping them in the running for La Liga until the final day.
A reckoning with the former galactico was coming however and he made it clear when he said in a public letter in newspaper AS that he was leaving as he did not feel he had “the support to build something in the medium or long term”. This can be translated into Zidane thinking that the spending required to rebuild a squad whose key players were all into their 30s, and keep competing at the very top, was not going to be forthcoming.
Coach Zidane threw in the towel when it was clear Madrid couldn’t financially back the overhaul he felt was needed (Photo: Gabriel Bouys/AFP via Getty Images)
Perez’s insistence on maintaining business fundamentals is perhaps a surprise to those who still remember the spendthrift days of his six-year first spell as club president two decades ago. But the fact he has always seen players as mere assets was shown again by this week’s leaking of a tape from 2006 in which he referred to much-loved club servants Casillas and Raul Gonzalez as “scam artists” whose sky-high reputations and wage packets were underserved.
Such realism (or cynicism) was seen again with how Ramos was eased out of the club this summer in a manner that drew such admiration from league chief Tebas.
It also means that while Madrid have suffered a lot due to the pandemic, they are now not faced with nearly as many difficult decisions as Barcelona’s new president Joan Laporta.
Barcelona’s salary cap for the coming seasons is projected to drop to an almost unimaginable €160 million (unless Laporta can raise around €200 million by selling players and cutting wages). Madrid’s cap will likely fall too, but again, will be within a much more manageable frame. They are still likely to be able to pay double what their arch-rivals can — something like €300 million for the coming season. For context,
Manchester City’s wage bill last season was around €410 million.
Which is not to say that lots of tough decisions aren’t currently being considered by Perez, director general Sanchez and Carlo Ancelotti, back at the club for a second spell as coach after quitting Everton.
The primary objective at Madrid for this transfer window is to deal with what the Spanish call ‘overbooking’ — to cut what is currently a 35-man first-team squad down to a manageable size for Ancelotti, and to lessen pressure on the wage bill.
The Italian was very careful not to throw out any hostages to fortune at his unveiling last month. He knew from conversations with Sanchez before leaving Everton to return to the Spanish capital that he would have to work in a very different financial reality to the one he experienced in his first spell from 2013-15.
“We have a very big squad, and the first thing we have to do is evaluate the players we have, and reduce it a bit,” Ancelotti said. “We’ll have to see how we do that. I know the squad very well, the young players too, and those coming back from loans. We have many options in the squad, (and) need to calmly evaluate everything.”
Among the most pressing issues is with senior players Ancelotti knows from 2013-15 whose performances in recent years have not been up to the level of salaries negotiated when they were winning Madrid four Champions Leagues in five years from 2014 to 2018. These include a 33-year-old Marcelo, Isco, 29, and the returning Bale, who turns 32 this week.
Most starkly, Bale and Hazard alone make up 13 per cent of Madrid’s salary budget between them.