• F1's future in Spain

The pain in Spain

Kate Walker
June 17, 2012
Santander is title sponsor to the Spanish Grand Prix © Sutton Images
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One hundred billion euros. One. Hundred. Billion. Euros. But forget the Dr Evil style cackle, because in Spain nobody's laughing.

While European economies have been taking turns going down the plughole since the global financial meltdown of 2008, the past year has seen chaos become calamity, with Greece close to being pushed out of the Eurozone and Spain now on its knees with the begging bowl. Economists forecast that Italy is not far behind.

This month, the Spanish government approached the European Union seeking a €100 billion rescue package equivalent to an additional €20,000 in debt per citizen in a country that is already struggling to stay afloat. The money is needed to shore up the country's banking system, which has become locked in a symbiotic embrace with the government - should either party fall, the entire country will be plunged into financial ruin.

Simply put, the problem is this: the Spanish government has been keeping itself solvent in recent years thanks to loans from the banks - government debt to the banks is worth roughly eight percent of the banks' total loans and investments. If the banks go down, the government loses a vital source of funds. And if the government goes bankrupt and has to default on its loans? It doesn't bear thinking about.

When the International Monetary Fund put together a financial stability assessment on Spain earlier this month, they singled out Ferrari sponsors Santander as one of two national banks that could be seen as stable in the wider context of the collapsing Spanish economy. But this week Fitch Ratings downgraded Santander (and BBVA, the other bank named by the IMF) from A to BBB+, to keep the banks' ratings more in line with the rating of the overall national economy.

To paraphrase Lady Bracknell, to host one grand prix in the current financial climate may be regarded as a misfortune, but to host two looks like carelessness.

Spain's financial woes are not merely restricted to the national economy. The country is set up in such a way that local authorities have far greater control over their purse strings than in other European countries, and while regional autonomy over public spending has many benefits, it can also lead to crippling debt, as has been the case in Valencia and Catalunya.

In 2010, the most recent year for which statistics are available, the Comunitat de Valencia was $25 billion in debt. Catalunya was last reported as being €38 billion in debt and has since admitted it will need €13 billion in loans to pay off debts due this year. Those figures do not include either region's share of Spain's national debt, which was last calculated at €770 billion - and that figure does not include the €100 billion bailout currently being sought from the EU.

Over the course of the Canadian Grand Prix weekend, the Spanish news media began reporting that an alternation deal had been agreed between the authorities in Barcelona and Valencia. A calendar of the proposed schedule was published, showing that the Spanish Grand Prix contract would be extended to 2019, with the Circuit de Catalunya playing host to the race in odd-numbered years, and Valencia taking over in even-numbered years.

But it is one thing for circuits to decide how they would like to manage their hosting obligations, and another thing entirely to get proposed changes to the calendar approved by all the necessary stakeholders. Both FOM and the FIA will need to approve the deal, but - at the time of writing - neither body had heard from the national sporting authority, which is responsible for bringing the proposal forward.

Repeated attempts to contact the Spanish ASN for comment, or for confirmation that formal approaches had been made to both the FIA and FOM to change the calendar, went unanswered.

But it is known that F1 supremo Bernie Ecclestone is in favour of the Spanish alternation deal; in March he appeared to propose the idea himself. "Both Valencia and Barcelona have agreed that it is best to alternate, so now we are trying to choose the dates," he told Radio Valencia-Cadena Ser earlier this year. "It's simply a way for us to try and help Valencia and if by alternating with Barcelona it helps them, then it's a good solution. Obviously, the year Valencia does not host the event it would not have to pay anything."

And any proposal with Ecclestone's backing is almost certain to see the light of day, let alone one that comes with the 100 billion compelling reasons that accompany the Spanish circuits' desire to save money while preserving their country's slot on the F1 calendar.

What is odd about this proposed Spanish deal is the way that - long-term - it will actually end up costing one of the two circuits more money. The alternation proposal sees the Spanish Grand Prix switching between Barcelona and Valencia till 2019, with the Circuit de Catalunya hosting four races in that period and the Valencia street circuit laying claim to three.

But Valencia's grand prix contract was due to expire in 2014, or two races' time, while Barcelona's hosting agreement runs out in 2016. Financially, Valencia would be better off hosting races as scheduled for the duration of their contract with FOM before withdrawing from the calendar altogether, while Barcelona will be spending the same amount of money to share races with Valencia until 2019 as it would have done to run the course of their contract till 2016.

The fact that the two venues have come together to negotiate a sharing deal shows just how vital both regions perceive Formula One to be to their long-term interests. F1 may be the poor relation to MotoGP where Spanish motorsport fans are concerned, but as a marketing tool it is infinitely more valuable. Were that not the case, neither venue would be fighting to retain some semblance of a Spanish Grand Prix.

While Formula One is at risk of losing at least one grand prix to the Spanish financial collapse, the ramifications for MotoGP could be greater still.

That sport is concentrated in Spain, with Carmelo Ezpeleta (MotoGP's answer to Bernie Ecclestone) and Dorna Sports based in Madrid, and six of the grid's 21 riders coming from Spain. Spain plays host to four motorcycle grands prix each season, and provides a number of the sport's significant sponsors.

Whatever the ramifications Spain's financial collapse has on Formula One, you can guarantee that the effect on MotoGP will be exponentially more serious.

© ESPN Sports Media Ltd.
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