When Juan Luis Cebrian, the all-powerful boss of El País, outlined the main elements of a restructuring plan to his staff in October, he justified himself with an argument that brooks no contradiction: the newspaper, which is the leading daily in Spain, could no longer “continue to live so well” with too many overpaid journalists.

His reasoning was reminiscent of conservative government leader Mariano Rajoy’s message to the Spanish people, who, with every new austerity plan, assumes a contrite air and announces that the country can no longer afford “to live beyond its means”.

Is what is happening at El País emblematic of the economic stagnation in the rest of the country? The crisis which has struck the jewel of the Spanish-speaking press, owned by the PRISA media group, has much in common with the collapse of the country.

Record-breaking indebtedness caused by colossal investments, control in the hands of magnates from the world of finance, little or no concern for the interests of the press, bosses on multi-million euro salaries, summary layoffs which may prove to be counterproductive; “It is a metaphor for what Spain is experiencing today,” remarks Miguel Mora, the newspaper’s Paris correspondent.

Some 129 journalists have now been shown the door. That is close to a third of a total workforce of 466 employees, and the list of those who have been let go includes some of the major names associated with the newspaper. Four local editions of El País (including the Valencian and Andalucian editions) are to be closed down, while the journalists who have escaped the restructuring plan are to have their salaries cut by 15 per cent.

Union fury

The announcement of the “ERE” (a Spanish acronym for a restructuring) prompted a number of violent shocks within the company. For three days in November, virtually all of the staff went on strike, and the newspaper, which is the sole centre-left daily in Spain, had to make do with publishing news agency reports. And the struggle between Cebrian and the committee of journalists formed in response to the restructuring is not over yet.

In Spain, news gathering has been devastated by the crisis. According to figures from the journalists' professional association (FAPE), close to 8,000 Spanish journalists have been made redundant since 2008.

Over the same period, 67 media outlets, including a several print titles, have closed. Daily newspapers have been particularly hard-hit: Publico, a left-wing alternative to El País launched in 2008, threw in the towel in early 2012. At the same time, three of the country’s four free dailies with national circulation have also closed down. For its part, El País has reported a 60 per cent drop in advertising revenues since 2007.

However, there is something not quite right about this analysis. On close inspection, El País amounted to something of an exception in the print media sector. Since its launch in 1976, the title had always remained in the black, generating €12m in profits 2011, and more than €800m in the last 10 years. Even in the first half of 2012, which was one of the worst periods in recent history in Spain, the newspaper maintained a positive bottom line – a minor miracle when you consider the troubles of its competitors.

‘Operation Liberty’

The management of El País has implied that the newspaper first reported losses in August 2012. But is such an eventuality enough to justify getting rid of a third of the its staff?

“The fall of El País is not a natural catastrophe, but a perfect example of how bad management can undermine the most powerful journalistic institution ever to emerge in Spain. The Internet and the so-called paradigm shift only played a minor role in this drama,” writes Pere Rusiñol, a star investigative reporter who left El País in 2008.

The trouble at the PRISA dates back to 2007. Just when the crisis was about to strike, the group fell victim to delusions of grandeur, launching a takeover bid for the subscriber television network, Sogecable (of which it was already part-owner). The group’s debt ballooned at the worst possible moment, just before the Spanish bubble burst. Starting in 2008, while Spain sank into the red, PRISA had only one objective in mind, which was the main tenet of a strategy that can best be described as rudimentary: to get rid of its colossal debt of €4.6bn.

One of the key acts in the development of the current crisis took place in November 2010. That autumn, PRISA embarked on an initiative codenamed “Operation Liberty” which aimed to mop up part of its debts by attracting new capital by offering fresh shares. This mainly involved rolling out a red carpet for Liberty Acquisition Holdings, an investment company controlled by a handful of shareholders, including the well-known Wall Street duo, Martin Franklin and Nicolas Berggruen, who brought in €650m of fresh capital.

Before “Operation Liberty”, the longstanding proprietors of El País, the Polanco family, owned 70 per cent of PRISA. In the course of a deal that put an unprecedentedly low valuation on the group and offered very generous terms to Liberty, they were to give up half of this holding. “On that day, PRISA was changed for ever: it was at that point that what had been a Polanco family business began to be devoured by sharks,” writes journalist Pere Rusiñol, who has recently published a remarkable investigation of the PRISA group in the [satirical] review Mongolia.

Plunging fortunes

What happened in the three years that followed Operation Liberty? PRISA’s financial situation grew steadily worse, in part because of the economic crisis. Shares in the group lost 89 per cent of their value, while the Polanco family holding was further diluted. As for the group’s debt, it continued to weigh in at a gigantic €3.5bn. In January 2011, PRISA announced its intention to layoff 18 per cent of staff in its businesses in Spain, Portugal and Latin America.

However, Nicolas Berggruen and Martin Franklin’s investment was nonetheless highly successful. In their contract, they were guaranteed a return of 7.5 per cent on their stake in the group, for the first three years following Operation Liberty, regardless of PRISA’s results.

The other major winner in the group’s recapitalisation was none other than Juan Luis Cebrian, PRISA group’s iconic CEO. The 68-year-old numerary of the Royal Spanish Academy paid himself the most fabulous sums at the height of the crisis. In 2011, a year in which PRISA declared losses of €450m, its CEO took home a sum estimated at between €11m and €13m.

The sheer extravagance of the amounts paid out to Cebrian has come to symbolise the “double standard” at the heart of Spain’s most respected daily. Journalists’ trade unions were quick to remark on the absurdity of a situation in which the sum that their boss took home in 2011 is almost equivalent to the amount per year that El País can expect to save by laying off 129 journalists. A truly disastrous comparison.

However, the El País saga does not stop there. Last summer, in further bid to reduce its vast debt, the management of PRISA embarked on yet another manoeuvre, which involved offering their creditors a stake in the group in lieu of cash which it did not have. As a result: two Spanish banking heavyweights, Santander and Caixabank (and also HSBC), acquired significant holdings in PRISA.

Bank takeover

Overnight, the board of Spain’s main progressive newspaper was transformed into an assembly of current and former leaders of major well-known banks.

A number of journalists have highlighted what they perceive to be the increasingly frequent publication of articles relaying the views of two of Spain’s principal bankers, Emilio Botin (a bêtes noire of the indignados movement and the executive chairman of Santander) and Isidro Fainé (the ultra-conservative chairman of Caixabank) since their acquisition of a stake in PRISA. On November 14, for example, Botin was given an entire page for yet another piece on the management of the Eurozone crisis.

Is this just a Spanish story? Not exactly. The troubled waters of PRISA have also provided a comfortable hunting ground for a number of French citizens: in particular Emmanuel Roman, strongman of the British hedge fund Man Group, and multiple board member, Alain Minc, who is also a close associate of Nicolas Sarkozy.

Like the other PRISA board members, on October 22, just a few days after the announcement of the layoffs at El País, Alain Minc received a nice bonus: a bundle of PRISA shares (19,392 to be precise) in recognition of services rendered.

Unfortunately for him, the share price, which is currently in the region of €0.4, is still very low — which meant that this particular windfall was barely worth €7,700. A mere trifle.

Other parts of the series:

Still pandering to the power brokers

Newspapers will not die in Silicon Valley

Culture is becoming a luxury

Embedded in the Brussels bubble