Talks to renew the 27-year-old’s Bernabeu contract have reached a stand-off with well-connected Madrid newspaper Marca claiming that Pepe wants four times what he is currently paid.
The former Porto defender has apparently been offered a double-your-money deal on almost £50,000 a week - but is said to be demanding a whopping £95,000 after tax.
The huge gap between negotiating positions has been interpreted as a warning that other clubs have lodged and interest and that Pepe would be prepared to sit out the last 18 months of his contract and leave for nothing.
Reports abound in Spain two months ago that Chelsea were prepared to wait till his deal expired in 2012, while Marca today claims interest from Manchester United, Inter Milan and even La Liga rivals Barcelona.
If Madrid feel there can be no progress, January’s transfer window may be the opportune to cash-in on the £7million-rated defender.