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Barcelona’s Financial Issues: What Xavi’s Successor, the Next Coach Needs to Know

The esteemed role of Barcelona’s manager is revered in the realm of global football. However, stepping into this position amidst the club’s profound financial woes presents a daunting task for Xavi’s eventual replacement.

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Soccer Football – FC Barcelona Press Conference – Camp Nou, Barcelona, Spain – April 17, 2023 FC Barcelona president Joan Laporta during the press conference REUTERS/Albert Gea

Joan Laporta, who returned as club president in 2021, has employed innovative tactics, such as leveraging future earnings, to bolster the team’s competitiveness. While these strategies facilitated notable signings like Robert Lewandowski and the retention of rising talents, they also underscored the club’s dependency on short-term fixes.

As the season unfolds, Barcelona finds itself grappling with on-field setbacks, including recent defeats in key competitions. Amidst this backdrop, looming financial constraints are poised to force significant cuts to the wage bill and potentially necessitate the sale of key players to address the club’s staggering debts exceeding €1 billion.

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FILE PHOTO: Soccer Football – LaLiga – Rayo Vallecano v FC Barcelona – Campo de Futbol de Vallecas, Madrid, Spain – April 26, 2023 FC Barcelona coach Xavi before the match REUTERS/Juan Medina

Despite Laporta and his team’s demonstrated ingenuity in navigating financial hurdles, the next manager will likely inherit a squad with diminished resources compared to Xavi’s tenure. This article delves into the impending likelihood of high-profile departures and the ensuing challenges for Barcelona’s next managerial incumbent.

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Barcelona’s Legal Battle with Libero: Uncertainties Surrounding Financial Rescue Plans

Recent headlines have stirred anticipation that Barcelona could recoup €40 million from German company Libero Football Finance, potentially providing a much-needed financial boost for Xavi’s squad during the winter transfer window. Last summer, Libero had committed to taking over payments owed to Barcelona from Socios.com and Orpheus Media as part of a ‘SPAC’ initiative aimed at launching a new Barca Media company on NASDAQ by November.

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However, doubts arose in October regarding the viability of the Barca Media SPAC plan, valued at $1 billion, as reported by The Athletic. The departure of key figures, including former Chelsea and Manchester United executive Peter Kenyon from Libero’s board, further complicated matters, as the company no longer had the required quorum to make decisions.

Meanwhile, setbacks emerged at Mountain & Co, the Swiss financiers overseeing the SPAC for Barcelona. Glazer Capital’s reduction in its share in the investment vehicle was interpreted by some as a lack of confidence in meeting the April deadline, after which the SPAC must dissolve.

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FILE PHOTO: Soccer Football – FC Barcelona president Joan Laporta speaks at Barca Cafe inauguration – Camp Nou, Barcelona, Spain – May 14, 2021 FC Barcelona president Joan Laporta speaks at the Barca Cafe inauguration REUTERS/Albert Gea/File Photo

Reports of potential involvement from Key Capital in the SPAC were dismissed by multiple sources, exacerbating uncertainties surrounding the project. The recent tightening of rules by the U.S. Securities & Exchange Commission on SPACs has further hindered efforts to attract new funding, casting doubt on the ambitious $1 billion valuation initially proposed.

While legal action has been initiated against Libero for the alleged non-payment of €40 million, doubts persist regarding its success. With neither Libero nor Mountain & Co offering comment, the future of Barcelona’s financial rescue plans remains uncertain. Should the SPAC be dissolved, the €120 million invested by its backers must be returned, leaving the club with limited resources for transfers or other expenditures.

Unless unforeseen developments arise, the Barca Media ‘lever’ that facilitated the club’s transfer activities last summer appears unlikely to provide significant assistance in the future.

La Liga Salary Cuts and Barcelona’s Financial Struggles: Impacts of the ‘Levers’ Policy

Despite the challenges posed by La Liga’s salary limit reductions and restrictions on leveraging future earnings, Barcelona’s financial struggles persist. The significant decrease in the club’s official permitted salary limit from €648 million to €270 million for the current season reflects the tightening regulations implemented by La Liga clubs in November 2022.

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FILE PHOTO: La Liga President Javier Tebas poses before an online interview with Reuters at the La Liga headquarters in Madrid, Spain January 27, 2021. REUTERS/Susana Vera/File Photo

These changes, which limit the use of ‘lever’ money for current expenditures to five percent of a club’s annual turnover, have forced Barcelona to make difficult decisions regarding player signings and squad management. With the club’s real squad cost for 2023-24 budgeted at €492 million, La Liga rules mandate cuts before any further player acquisitions can be made.

Barcelona’s attempts to bolster their squad during the winter transfer window have been hampered by the absence of the expected €40 million from Libero. Despite desires from key figures like Xavi, Laporta, and Deco to strengthen the team, the inability to secure additional funds has limited their options.

The recent signing of Vitor Roque as an ’emergency’ replacement for the injured Gavi highlights the club’s reliance on temporary solutions to navigate financial constraints. While Roque’s arrival provides temporary relief, his registration only extends until June 30, necessitating adjustments to the salary limit for a permanent inclusion.

Barcelona’s financial woes are compounded by their ongoing reliance on short-term fixes, exemplified by the temporary registration of players without addressing underlying squad cost and financial issues. La Liga insists that the expected €40 million from Libero must be accounted for within the club’s current season budgets, further complicating their financial outlook.

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FILE PHOTO: La Liga President Javier Tebas poses during an interview with Reuters at the La Liga headquarters in Madrid, Spain, October 2, 2018. REUTERS/Paul Hanna/File Photo

Additionally, the inclusion of €60 million from the Barca Studios lever in La Liga’s salary calculations underscores the intertwined nature of Barcelona’s financial struggles and their impact on league regulations. As the club navigates these challenges, the need for sustainable long-term solutions remains paramount to secure their financial stability and competitive standing in the future.

Barcelona Faces Mounting Financial Challenges Amid Regulatory Scrutiny

The failure to secure €40 million from Libero Football Finance would compound Barcelona’s financial woes, resulting in a significant €100 million shortfall in their 2023-24 accounts. With La Liga’s tightened rules limiting the use of ‘levers’ and the club already exceeding its salary limit, avenues for financial maneuverability are severely restricted.

The potential sale of high-earning players like Lewandowski or Frenkie de Jong by the end of the Spanish tax year could alleviate some pressure, but the first €100 million raised would need to offset the existing budget deficit. Until this is achieved, La Liga regulations prohibit any expenditure on new signings.

Efforts to secure permanent deals for loanees Joao Felix and Cancelo face substantial hurdles due to their substantial wages and transfer fees. Moreover, the looming departure of players like Vitor Roque and Martinez from the La Liga squad raises immediate concerns, with assurances from Barcelona regarding their registration for the next season.

Joan Laporta Deco Image Credits Club Website Barcelona's Financial Issues: What Xavi's Successor, the Next Coach Needs to Know
Joan Laporta & Deco, Image Credits- Club Website

Despite past successes in registering desired players through creative means, the club’s deep-rooted financial issues pose challenges for future transfer windows, with room for maneuver likely to diminish further.

Beyond domestic concerns, UEFA’s scrutiny of Barcelona’s financial practices adds to the club’s challenges. A recent fine imposed by UEFA for misreporting profits underscores the complexity of the situation. Despite the possibility of further appeals, UEFA’s latest financial sustainability rules will play a pivotal role in evaluating Barcelona’s financial health for the 2024-25 season and beyond, with strict guidelines on profit and loss calculations and allowances for losses.

Barcelona’s Financial Quandary: Navigating Profit Claims, UEFA Scrutiny, and Potential Remedies

Barcelona’s financial reports for the 2022-23 season boasted a net profit of €304 million, despite a staggering 39 percent surge in staff costs, elevating the club’s wage bill to €639 million, the highest in global football. This apparent profit was facilitated by including income from various sources, including a leveraged deal with Sixth Street and shares in Barca Studios.

However, UEFA’s scrutiny of such accounting practices raises concerns, as they may interpret the inclusion of non-transfer income as erroneous reporting. This could result in a significant loss on the books, potentially triggering severe penalties, especially if deemed a repeated offense within a three-year period.

While reports suggesting exclusion from the 2024-25 Champions League remain speculative, past instances such as Juventus’ exclusion highlight the gravity of UEFA’s sanctions for financial violations. Barcelona remains confident in avoiding such penalties, despite ongoing discussions about a potential European Super League and concerns about the club’s financial future.

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La Liga President Javier Tebas poses during an interview with Reuters at the La Liga headquarters in Madrid, Spain, October 2, 2018. REUTERS/Paul Hanna

Amidst these uncertainties, the prospect of selling a portion of the club to alleviate financial strains has emerged as a contentious topic. Jaume Roures, a close associate of Barcelona president Laporta, advocates for this approach, raising concerns among fans about the club’s cherished socio-owned model.

However, the urgency to address Barcelona’s financial woes grows as traditional short-term solutions, like leveraging future earnings, face resistance from governing bodies. With limited options available, the club’s leadership faces difficult decisions ahead, navigating the delicate balance between financial stability and preserving the club’s identity and values.

Barcelona’s Financial Challenges Persist Amidst Stadium Renovations and Revenue Losses

As Barcelona continues to grapple with financial hurdles, playing at their temporary Montjuic venue while the Camp Nou undergoes extensive renovations is expected to incur losses exceeding €78 million in lost earnings. Additionally, the club has commenced repayments of €40 million per season to Sixth Street for leveraging their domestic TV rights.

While the projected budget for the 2023-24 season initially showed an €8 million profit, industry sources suggest this outlook may be overly optimistic. The prevailing sentiment is that the club’s only viable path to financial stability is through player sales, both to generate immediate income and to alleviate the wage bill for subsequent seasons.

Camp Nou Image Credits Club Website Barcelona's Financial Issues: What Xavi's Successor, the Next Coach Needs to Know
Camp Nou, Image Credits- Club Website

For any incoming manager, realism will be essential in navigating these financial constraints. There will be pressure to offload players, particularly the younger stars who represent the club’s most valuable assets.

Despite these challenges, senior figures at Barcelona remain steadfast in their belief that the socios model is not under threat and express confidence in the long-term strategies devised by President Laporta and his board. Anticipated returns to a partially renovated Camp Nou later this year, coupled with potential revenue boosts from ventures like the European Super League and changes in kit suppliers, offer glimmers of hope for improved financial performance.

President Laporta’s reassurances notwithstanding, Barcelona supporters and the incoming manager will scrutinize the club’s financial health with keen interest, hoping for tangible evidence of stability and progress in the face of ongoing challenges.

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