Can Real Madrid afford to overspend?

Real Madrid president Florentino Perez apparently has the financial resources to pay record transfer fees. Perez’ Grupo ACS (Actividades de construccion y servicios) provides infrastructure improvements globally. Among ACS’ latest projects is rebuilding the entire high tension wiring system of the United Arab Emirates.

But rivals are questioning Real Madrid’s payments for Cristiano Ronaldo (94 million euros) from Manchester United and Kaka’ (67.2 million euros) from Milan, plus plans to spend another 150 million euros, possibly on Xavi Alonso (Liverpool), Maicon (Inter), Franck Ribery (Bayern Munich), and David Villa (Valencia). Barcelona president Joan Laporta said the Real Madrid spending spree is distorting market values. And, the economy in Spain is suffering, as it is in most of the world, making it difficult to justify spending mega-sums.

Spain, though, has an advantage over other countries in attracting players, since clubs are allowed to carry major debts. Another attraction for high-earners is that Spain has a much lower tax on wages than England or Italy.

Real’s debt is listed at 562 million euros. Spain’s La Liga clubs are carrying 3.4 billion euros of debt.

UEFA president Michel Platini proposes that clubs’ finances must be balanced, or they will risk being barred from Champions League play. Barcelona, which has 439 million euros in debts, and Real Madrid would not pass that UEFA test; but it is difficult to believe either club will not be competing for next season’s European title.

Perez is attempting to duplicate the success he brought Real Madrid after the arrival Luis Figo and Zinedine Zidane, creating the Galacticos earlier this decade. But Perez might be overdoing it -- again. Real Madrid began to decline partly because of its inflated salary structure, losing Claude Makelele to Chelsea.

Kaka' and a couple of central defenders would have been sufficient this time around, especially since Real Madrid has lost Fabio Cannavaro.

Here is a list of the all-time top transfer fees (in euros):

1) 94M – C. Ronaldo (Manchester Utd./Real Madrid) 2009;
2) 68.8M – Zinedine Zidane (Juventus/Real Madrid) 2001;
3) 67.2M – Kaka’ (Milan/Real Madrid) 2009;
4) 55.8M – Figo (Barcelona/Real Madrid) 2000;
5) 53.6M – Hernan Crespo (Parma/Lazio) 2000;
6) 51.1M – Robinho (Real Madrid/Manchester City) 2008;
7) 49.2M – Gianluigi Buffon (Parma/Juventus) 2001.

It should be noted both Ronaldo and Figo were developed by Sporting Lisbon.