How the coronavirus pandemic effects Real Madrid financially

Yesterday saw the inevitable announcement of wage cuts at Real Madrid with all playing and executive staff agreeing to take a 10-20% salary cut. The cuts were made to shield non-sport employees from the financial repercussions of the virus and to contribute “to the economic objectives of the entity [the club] in view of the decrease in income that it is suffering these months as a result of the suspension of competitions and the paralysis of a large part of its commercial activities.”

Despite joining Atletico Madrid and Barcelona in making cuts, Real Madrid wage cuts aren’t as severe as their domestic rivals who plan on slashing wages by 70%. Both clubs are also applying for an ERTE to help manage the financial backlash from the pandemic. Real Madrid, meanwhile, do not intend to do that.

Before speculating why Real Madrid aren’t applying for an ERTE, here’s what it does. An ERTE is a Spanish legal labour mechanism by which any company can apply emergency measures to (a) suspend/end employment or (b) reduce salaries as a result of extreme circumstances.

The rules for applying for an ERTE have been laxed so football clubs can apply. Should they their requests be accepted, football clubs will be entitled to cut wages by 70%. Barcelona have reportedly applied for an ERTE for their remaining sporting and non-sporting staff having already agreed a 70% wage cut for the men’s first team.

Atletico Madrid, meanwhile have had their request for a ERTE accepted with plans for the men first team to make a contribution to ensure that the club’s non-sport staff don’t suffer.

There are a number of reasons why Real Madrid didn’t apply for an ERTE, the main one being that they don’t need to. Barcelona and Atletico Madrid decision to apply for an ERTE is partly fuelled by massive debt at both clubs (217 and 500 million respectively). Real Madrid do not have debt issues, reporting a -27 million net debt at the end of the 2018/19 season.

There are also plenty of disadvantages to the scheme, something Side Lowe outlined in great detail in his ESPN article. Lowe’s main points of concern were;

• An ERTE wage cut last at the very least 90 days and at the most until the end of Spain’s state of emergency (currently April 11th)
• The wage cut can be appealed
• An ERTE could cost the Spanish state around €1,800 a month per each first division player that is granted one. Given the current circumstances and that football clubs are private bodies, it doesn’t look great morally.

In short, applying for an ERTE is a immoral and potentially short term fix to an increasingly long term problem.

There is a narrative from all this where one could say Atletico Madrid and Barcelona are being savvy by making big cuts to their wages bill and using the Spanish government to help them through the crisis.

I feel, however, this take is unfair. As already mentioned, the ERTE has alot of issues, issues that Barcelona and Atletico Madrid are well aware of, but are forced to ignore because of rising debt.

Where desperation around debt has forced their domestic rivals into certain decisions, Real Madrid have made all their decisions off their own free will and undoubtedly with the long term in mind. That alone should put any fears about Madrid’s post-coronavirus future to bed.