Home SPORTS GIST Football BARCELONA’S FINANCIAL CRISIS: HOW BAD IS IT AND IS THERE A WAY OUT?

BARCELONA’S FINANCIAL CRISIS: HOW BAD IS IT AND IS THERE A WAY OUT?

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Farouq Oduola A.

Barcelona has been going through a major financial crisis in recent months, which many think might jeopardize all the club stands for.

We examine what produced the crisis in the first place, what it means now, and what the future may hold.

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Cause of the Crisis: 

The club’s wage bill has been the focal point of this financial issue. With La Liga’s own Financial Fair Play regulation, each club’s salary budget is limited. Simply said, a club cannot spend more than it makes, and Barcelona has clearly exceeded this limit.

Barcelona has had one of the largest salary bills in European football in recent years, thanks to a slew of big-name signings and the addition of new players that cost the club a lot of money. Despite their recent purchases of famous stars, Barcelona has not sold many players, resulting in a salary expenditure that is larger than their earnings.

Barcelona needs to cut £156 million (€187 million) from their current wage bill, according to Catalan radio RAC 1. Last year, their maximum was £296 million (€347 million); this year, it is £136 million (€160 million).

Scenario Right Now:

The team is presently unable to register any new players without reducing its salary cost. Barcelona’s pay is 110 % of its entire income, and if they spend more than that, they may only spend 25% of it.

The team has resorted to bringing in free agents. Barcelona, who have agreed terms to sign Memphis Depay, Eric Garcia, Sergio Aguero, and Emerson despite the fact that they are all free agents, however are unable to finalize the deal.

Lionel Messi and his new two-year deal are in the same boat. He generates more money for the club in commercial revenue than he does for himself.

They are now desperate to get players like Filipe Coutinho, Miralem Pjanic, and Samuel Umtiti off their wage bill, but no club has been willing to take on the burden of these players’ high wages.

Even if they could off a loan move away for these players, the club would only be able to manage 64 million euros, which is nowhere near the 200 million euros they need to cut.

Could the club be forced to sell club legends like Sergio Busquets and Jordi Alba? The club has already sold Konrad de la Fuente, Jean-Clair Todibo, and Junior Firpo. They clearly require a more stable solution.

Is This the End of The Road for Barca?

I don’t believe that is the case.

As terrible as things appear to be, there are a few steps they may do to help the team get out of the current slump.

Experts have sat together to assess the issue; so here’s what we depict from their analysis:

They are in terrible shape, yet they own their stadium and training facility, and their income was the highest in Europe last season.

What is true is that they will have to refinance their debt as soon as possible, and they will have to drastically alter their plans for the next four or five years – no more €100 million (£88 million) signings, and possibly no €800 million (£707 million) redevelopments of the Nou Camp and surrounding areas.

That’s a lot of money owed. When you exclude the amount due to them, the net debt is closer to €820 million (£725 million), which is still outrageous but not as awful.

The major issue is that €720 million (£636 million) of that is short-term debt, with €196 million (£173 million) owing to other teams for players.

Clubs who owe large sums to other clubs are frowned upon by UEFA. And, if you want to know how ‘short’ short-term is, they have until June 30 to pay €266 million (£235 million) to various banks and financial organizations.

So, how are they going to get out of this?

They need to sit down with those institutions and work out a lengthier payback schedule with them.

Goldman Sachs is one of the creditors, as well as a long-term financial partner in the projected €800 million (£707 million) renovation of the Nou Camp.

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