Rafa Benitez is close to signing a new five-year contract with Liverpool. The Daily Mail says after months of haggling with co-owners Tom Hicks and George Gillett, the Liverpool manager has accepted in principle a new deal that will run to 2013.

The breakthrough was greeted with relief by Anfield's hierarchy and came on the day long-time admirers Real Madrid called off their pursuit of Benitez by turning to sacked Tottenham boss Juande Ramos as replacement for Bernd Schuster.

With Liverpool due back from Eindhoven at lunchtime today after their 3-1 Champions League victory took them to the top of their group, an announcement confirming the new deal for the Spaniard is expected in the next 24 hours.