Real Madrid, Barcelona under investigation from EU

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Turns out the two richest teams in Spain may be in very big trouble.

Real Madrid and Barcelona top the list of seven Spanish teams under investigation by the European Union (EU) over irregular public funding, as the European Commission starts a lengthy process to put the top Spanish clubs under the spotlight.

Osasuna, Athletic Bilbao, Valencia, Elche and second-tier Hercules are the other sides in question, as Madrid, Barca, Athletic Bilbao and Osasuna are accused of a corporate tax advantage of 5%.

One of the most severe allegations is against Real, who are said to have sold training ground land to the City of Madrid at an over-inflated price of 22.7m euros. ($31.9 million) While Valencia-based clubs Valencia, Hercules and Elche have apparently been handed up to $104 million in state-backed loans.

The clubs, if found guilty, would have to pay the vast sums of money back to the Spanish government.

However, Spain’s foreign minister Jose Manuel Garcia Margallo denied the clubs had broken EU rules. “The government will fight to defend Spanish clubs because they’re also part of the Spanish brand.”

While all this is happening under the looming cloud of Financial Fair Play coming into force in European soccer. FFP lurking in the background has made these allegations all the more harmful as it looks as though Spanish teams are trying to get their houses in order before strict financial regulations hit them hard. Under new rules large amounts of spending beyond their means and taking out loans will be limited as teams are encouraged to only spend the money the generate from endorsements, ticket sales and prize money.

Clearly the big boys in Spain can’t keep snapping up the biggest names in world soccer with only limited revenue streams to rely on.

The European Commission is in charge of the proceedings and its likely to take months to decipher whether or not the clubs acted incorrectly. But let’s break down one particular area, Madrid’s land by their training ground which they sold to the state.

According to a statement from the commission:

“Real Madrid appears to have benefited from a very advantageous real property swap with the City of Madrid. This swap was based on a re-evaluation of a plot of land at a value of 22.7m euros, instead of its earlier supposed value in 1998 of 595,000 euros.”

When City officials, businessman and soccer clubs are all involved, things like this happen quite a lot. But the sheer discrepancy in the value of that land is mind boggling.

It seems as though Spanish soccer is going to be under the spotlight and scrutinized for many months ahead.