The Team Money Built.(Spanish soccer team Real Madrid)

It just might be the sexiest courtship in the history of European football: day after day the sports pages from Edinburgh to Istanbul are filled with stories about the vast sums Real Madrid, the hottest brand in world football, is offering for David Beckham of Manchester United. Both sides deny even talking to one another, but it's widely believed Madrid covets the 27-year-old Brit not so much for his feet as for his face: Becks has launched more product endorsements than any other football player anywhere any time, and his ability to sell T shirts could help make Real Madrid richer.

Real Madrid has spent more money than any other football club in the world to build what Steve McManaman, a British player for the team, says is "arguably the best side of all time." But it has bled euros to get there--by some estimates as much as 500 million euros since 2000. "I get the feeling there's no financial strategy except buying players," says Tim Crow of Karen Earl Sponsorship, a London sports consultancy. Even in the Champions League, a bastion of capitalism amid the welfare states of Europe, Real is a rare spendthrift. Three of Europe's 10 highest-paid footballers play for Real, earning a total of nearly 20 million euros a year. In fiscal year 2002, Real spent 117.2 million euros on salaries--a whopping 77 percent of its total operating revenue. By contrast, Man U, which pays Beckham the highest footballing salary of all (6.6 million euros), limited wages to 48 percent of turnover.

The spending spree has brought two Champions League titles since 2000, and Real is heavily favored to win a third later this month, but at a dangerous price. "You're not managing the business realistically if your wages are over 60 percent," says Andrew Lee of Dresdner Kleinwort Wasserstein in London. Real celebrated its centenary last year, but as a modern business it reminds Stefan Szymanski, a football economist at Imperial College in London, of a recent phenomenon: the dot-com bubble. "What I see is a huge amount of expenditure and, with that, huge amounts of success on the pitch," he says. The bad news, he says, is that it all "seems likely to burst at some point."

Rivals tell another story. They argue that Real's success rests on a foundation of government protectionism. Back in 2000, construction mogul and former Madrid politician Florentino Perez was elected club ...