Passport

How the recession helps Real Madrid

It's the biggest international sports story of the summer: the £80 million ($131 million) transfer of Portuguese soccer star Cristiano Ronaldo from English club Manchester United to Spanish club Real Madrid. The amount is even more amazing given that Real broke a transfer record they set just last week: £56 million for AC Milan's Brazillian star Kaká.

And yet, as the financial crisis deepens, football clubs throughout the world are struggling with debt. Top leagues in Spain, England, and Italy all have teams collectively owing billions. Famous clubs like Liverpool and Valencia have had to delay stadium expansion, restrict new player acquistions, and (in the worst cases, like Valencia) even sell most of their stars.

But even though Real Madrid probably has the most debt of any club in Spain (almost €500 million (corrected), even before this summer's spree), they have been able to spend with abandon while the economic crisis cripples their rivals. Some of these reasons are legitimate: Real has the biggest fan base in Spain and one of the two or three biggest in the world, along with an excellent television contract (in Spain, contracts are negotiated on a team-by-team basis, not collectively as in most other leagues in Europe and in US sports). As a result, they consistently have among the highest revenues in the world. But, unlike almost every other club, Real has a trump card:

Finally, there's Real's status as, effectively, a non-profit social trust. This means they do not need to generate £30 million a year just to service their debt (like United).

Whatever debt they hold (and detail here is murky) is with local banks, many of whom are under political and social pressure not to tighten the screws. Real are too big and too important to fail or to come under the kind of debt pressures that affect traditional clubs. The club's social, political and economic significance dwarfs that of any other club in the world, with the possible exception of Barcelona. In that sense, they play by a different set of rules.

In other words, unlike almost any other operation in the world (with the possible exceptions of their rival Barcelona and the United States government), Real can keep on spending almost forever, knowing that their debts will never be called in. It really does give a whole new meaning to "too big to fail."

Alex Livesey/Getty Image

Passport

Uighurs in Paradise

More Uighur news this morning: the government of Bermuda has accepted four Guantanamo detainees, and says it will give them passports and make them citizens. Yesterday, Palau -- another beautiful, beachy island nation -- said it would take all 17 for temporary resettlement.

Here's part of the Bermudan premier's statement:

With the signing of his first Executive Order as President, President Obama set in motion the closure of the now infamous prison at Guantanamo Bay, Cuba. Of the prisoners held there many are innocent men, held without trial or any form of due process; many are refugees from their own lands whose political views are contrary to the regimes in power there. They have committed no crime. They have laid no plans to harm innocent citizens of any nation, but have been caught in a web of reaction to tragic events which at the time of their happening were not well understood.

In the eight years since these men have been detained the Government of the United States has been clear for some time of their innocence and moreover of their inability to return to their countries of origin. Their detention at Guantanamo Bay in the face of these facts has been termed by international human rights organizations as unjust. The decision to close the prison and to therefore relocate these men is not an easy one and the reluctance of many within the family of nations to absorb them into their populations is evidence of that fact....

[T]he Government of Bermuda has agreed to grant asylum to four refugees previously detained at Guantanamo Bay. These men are landed in Bermuda in the short term, provided with the opportunity to become naturalized citizens and thereafter afforded the right to travel and leave Bermuda, potentially settling elsewhere.

So, why Palau and Bermuda? The countries have more in common than warm sands and clear water and tiny populations. They're very friendly with the United States for economic reasons.

The U.S. government has military bases on Palau, and has given its government hundreds of millions in aid and financing. (Palau, which was a protectorate until 1994, actually uses the U.S. dollar as its currency.) Bermuda's economy depends on the United States in no small part as well; a large proportion of Bermuda's tourists come from the U.S., and Bermuda is a staple off-shore tax haven for U.S. financial firms. Here's a choice part of that same press release: 

Economically, the Government of the United States has long respected the work we do in the area of financial services and as a result the benefits of Bermuda's healthy insurance sector are evidenced in the billions of dollars in claims that were paid in the US after 9/11, Hurricanes Katrina, Rita and Wilma.

Photos: Bermuda (right) by Flickr user Okinawa Soba; Palau (left) by Flickr user LuxTonnerre