Spanish midfielder Michel has had limited opportunities at Birmingham since joining from Sporting Gijon in January of last year. The 25-year-old joined has made only nine first-team appearances this campaign thanks to the fine form of Barry Ferguson and has now joined AEK Athens on loan for the rest of the season.
Blues boss Alex McLeish was sympathetic towards his situation.
"I am sorry the Michel one has not worked out but Barry Ferguson's form has been stunning and made it difficult for him.
"Who knows, it could have been different if he had got the nod ahead of Barry and played regular football.
"I've been involved in a few transfer dealings over the past couple of years and I'm disappointed one hasn't worked out."
Michel, whose full name is Miguel Marcos Madera, said: "I'm happy to have joined AEK, a team which plays in Europe. It is a well-known club with history in Greece and Europe.
"I've come here to play until the summer and we'll see after then."