The story so far: On August 10, Paris Saint-Germain (PSG) signed Lionel Messi on a two-year contract, bringing an end to a glittering 17-year-career for the Argentine superstar at Barcelona that saw him win 35 trophies, including 10 league titles and four UEFA Champions League crowns, and the Ballon d'Or award for the world’s best player six times. This came after the Catalan club’s announcement on August 5 that Messi could not stay on because of “financial and structural obstacles”.
What were these ‘obstacles’?
In 2013, LaLiga set up a department to review the finances of each club and establish a cost limit for each season, which drew up financial fair play rules. This squad limit is the amount an outfit can spend on its players, coaches, physios, reserve teams etc. Factors considered to arrive at the limit include expected revenues, profits and losses from previous years, existing debt repayments and sources of external financing. Clubs have the flexibility to decide how the money is split between transfers and wages, provided the overall limit is not breached. According to football website The Athletic , this limit was €671 million for Barcelona in 2019-20. But last year it fell to €347 million, and reports suggest that for the upcoming season it is less than €200 million. Barcelona president Joan Laporta said even with Messi agreeing to a 50% salary cut, Barcelona’s wage bill would be at 110% of the club revenues. The LaLiga cap is 70%.
Could Messi have played for free?
Even with Messi’s entire salary off the balance sheet, Laporta said wages remained at 95%. To get it below 70%, Barcelona had to sell players and renegotiate contracts with high-earners, both of which have proved unsuccessful thus far. LaLiga stipulations that allow only 25% of the profits from sales to be used for fresh player investments make the task of reduction harder. Another sticking point was that Messi’s contract had run out at the end of last season and he had to be registered as a fresh player. LaLiga does not allow clubs to add new players without adhering to the fair play rules, the same clause which held up registrations of star signings like Sergio Aguero and Memphis Depay.
How did Barcelona get into this financial mess?
Following Neymar’s move to PSG in 2017 (for €222m), Barcelona, as a face-saving gesture, made a series of expensive buys. Ousmane Dembele arrived for an initial fee of €105m, Philippe Coutinho for €120m and Antoine Griezmann for €120m, but their performances have been middling at best. According to The Athletic , for the upcoming season, Barcelona has to account for a whopping €70m in wages just for the trio. Messi’s previous contract was worth €555.2m over four years, which many say drove up salaries of the rest of the squad. Revenue loss due to COVID-19 has exacerbated this situation, resulting in liabilities worth a staggering €1.3 billion.
How does PSG have the money, despite a string of acquisitions including Neymar and Kylian Mbappe?
PSG’s latest big-name signings — Gianluigi Donnarumma, Sergio Ramos, Georginio Wijnaldum and Messi — are all free transfers, and are expected to earn around €55m per annum in wages collectively. PSG is also owned by Qatar Sports Investments, a state-backed entity, which is flush with funds. In 2017, when European football’s governing body UEFA opened an investigation following the signings of Neymar and Kylian Mbappe (€180m), the French club persuaded authorities that money was raised through “sponsorships” from the likes of Qatar Tourism Authority and Qatar National Bank, also having varying levels of state backing. In 2020, to mitigate the effects of the pandemic, club owners were permitted to pour additional money. Where many teams struggled to do this because of revenue loss, PSG could spend as it was backed by a sovereign fund. Also, UEFA’s financial fair play rules, unlike the LaLiga’s, look back at spending in past seasons. So, a club outside Spain can add a highly priced player and win the biggest titles, and a breach of fair play rules, if any, will invite sanctions only years later. LaLiga seeks to avoid this distortion of competition by applying the rules in advance.
In Messi’s exit, what has Barcelona lost?
In the last two seasons, the feeling that Messi was single-handedly carrying Barcelona was inescapable. The club will lose that security. Barcelona is also staring at a potential loss of brand value, diminished match-day revenue and merchandise sales. For UEFA, it’s a moment of reckoning too. Calls for a uniform spending cap all across Europe, rather than leaving it to individual leagues, have grown louder.
Published - August 15, 2021 03:30 am IST
