Barcelona has a "psychological issue," according to Xavi, who has admitted that his players are lacking courage.
Xavi was drafted in to replace Ronald Koeman in the Camp Nou hot seat at the start of November and managed to deliver two wins and a draw in his first three games, briefly lifting the mood of gloom following the club's poor start to the season.
However, Barca then came crashing back down to earth with a 1-0 loss to Real Betis and exited the Champions League after a 3-0 defeat to Bayern Munich, with the head coach left questioning the collective mental strength within his dressing room.
What does Xavi believe about his side?
Xavi still believes there is enough talent in the Blaugrana's ranks to be successful, but has warned that they must be "brave" to start challenging the elite again.
"It is a psychological issue rather than a football one," the Spaniard told a press conference.
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"They have to believe it and that is my job. We are encouraging them to dare and be brave. At Barcelona it's not worth playing 6/10 or 7/10. You have to aim for excellence.
"This is what is missing. Courage, aiming high and not low because that is not what Barcelona do. Being brave and understanding the game, we are not that far from what we want.
"The squad has the level to compete and win titles. In the Bayern game there was also a psychological aspect, but also [a sign that] habits have been lost."
Can Barca still turn its season around?
Xavi was speaking ahead of Barca's latest La Liga outing at Osasuna on Sunday, which it must win to stay in the hunt for a top-four finish.
A league title triumph now appears to be beyond the Blaugrana, but they do still have two other trophies to compete for in the second half of the campaign.
MORE: Barcelona out of Champions League: Explaining how it happened
Barca will seek to defend its Copa del Rey crown while also going all the way in the Europa League — having dropped into Europe's secondary competition for the first time since 2003-04.
