OK, so i have football sources that say that Franco used Real Madrid to restart diplomatic relations and it gave a huge boost to economy. But are there any hard historical sources which suggest any of this. Was his support of Real Madrid even true or an exaggerated rumour
I'm neither an expert on Real Madrid nor on Spanish history, but the first question is one I can answer: Yes, there's truth to it. Franco used football in general and Real Madrid in specific as a means to appease his opponents, first domestically, then internationally. He used his political leverage to influence the transfer of Alfredo di Stéfano, a Real Madrid legend as described here. Franco hi-jacked the transfer of di Stéfano from Columbian club Millonarios to FC Barcelona (bitter rivals back then, too) by undermining the negotiations as well as creating a new law that forbid clubs to sign foreign players. As head-of-state, he had the ability to directly decide on di Stéfano's fate and orchestrated a move to Real Madrid.
As far as football's influence on diplomatic relations go, I'm hardly familiar with the matter. But considering this source gives an overview of Franco's politisation of football in Spain, it may serve as a solid starting point for investigation of the questions I could not answer.
A good source for stuff like this would be the British football journalist Sid Lowe - he writes on Spanish football for the Guardian, but is also a historian by training and is very knowledgeable on the history of the game in Spain.
Here he reviews Phil Ball's book Morbo: The Story of Spanish Football, and suggests that
Ball is more convincing. He highlights some of the ways in which Real Madrid's success was utilised by Franco, and those occasions when the régime did indeed interfere to tilt the balance in Real's favour. But he rejects that favourite Barça allegation that the success of Madrid was built solely upon coercion, and pokes fun at the culés' triumphalist self-perception.
Since Spanish football is so dominated by Real Madrid and Barcelona, and always has been, the debate can be a bit polarised - either that all Real Madrid's successes were ill deserved, or that Barcelona are just envious of them.
Lowe has himself recently published a book on the history of the rivalry, Fear and Loathing in La Liga: Barcelona vs Real Madrid, and a good portion of it deals with their respective histories under the Franco regime, so I recommend it to you.