Real Madrid's big spending could come at a price

MADRID — Real Madrid's big spending on new players must translate into on-field success or the Spanish powerhouse could face tough economic times.

Madrid has spent around $350 million to buy the likes of Cristiano Ronaldo, Kaka, Karim Benzema and Xabi Alonso in a bid to overturn five years of failure in Europe — especially last season, when archrival Barcelona became the first Spanish club to win three major trophies in one season.

But club president Florentino Perez's ambitious plans come at a hefty price.

As of June 30, Madrid had debts of $800 million — and that was before the lavish summer spending. Perez is banking the club's future on a model that cost him the presidency once before.

"It's the same strategy as he did the last time he was Real Madrid president. He managed great results and not just on the field but also economically," said Juan Carlos Lazaro, an economics professor at Spain's Instituto de la Empresa, a Madrid-based business school. "But every loan is a risk, especially in times such as these."

Spanish building societies Banco Santander and Caja Madrid both issued loans of about $107 million to help finance Perez's spending spree at a time when banks are tightening loans and Spain's economy is one of the hardest hit in Europe, with nearly 18 percent of the population unemployed.

"It's scandalous what Caja Madrid and Banco Santander have done considering the serious problems small businesses and individuals face," said University of Navarra economics professor Jaume Llopis. "But obviously these banks have received the necessary guarantees from Real Madrid. But from what I can tell, there are no other entities who have lent out money like this."

Perez, who led the club from 2000-06, is counting on television rights fees, apparel sales, tickets and re-negotiated marketing contracts to fund the world's most expensive squad.

"It's a model where great players and players coming from the farm system form a mixture of quality — and Madrid quality — which excites fans all over the world," Perez said in an interview earlier this summer. "This model also guarantees economic revenues to guarantee we remain independent."

Although Madrid is regularly considered Spain's No. 1 team and the one that gets what it wants, the club was unlikely to secure the funds without the 57-year-old construction magnate at the helm.