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Manuel Pellegrini's appointment as Manchester City boss is being held up by a £3.2million contract stand-off.

Pellegrini hasagreed to take over at City, but the move has been delayed by an ongoing contractual issue with his former club Malaga.

The Mirror has learned that Pellegrini has not been paid by Malaga for two months - and that a third month without pay would entitle him to walk away for free.

That would mean deposed Premier League champs City would not have to meet the £3.2m buy-out clause that would release Pellegrini from the final year of his deal with the Spaniards.

With City already paying sacked boss Roberto Mancini £7m in compensation, the club are keen to avoid coughing up another hefty sum to secure his replacement.

Pellegrini has agreed a £15m, three-year deal with City and had been expected to be confirmed as their new boss earlier this week.

But the chaos surrounding Malaga's financial situation has delayed the 59-year-old's appointment, with City hoping to have had Pellegrini in place by now.

Pellegrini has already held a meeting with City chief executive Ferran Soriano and sporting director Txiki Begiristain, to put plans in place for next season.

City's incoming boss sanctioned the £46m outlay for midfield duo Fernandinho, from Shakhtar Donetsk, and Sevilla's Jesus Navas, despite his appointment still not having been ratified.

(Image: MCFC.co.uk)

Despite the hold-up, City are adamant Pellegrini will be installed as their new boss, officially starting work on July 1 once he has returned from holiday.

Malaga have already been banned from competing in next season's Europa League by UEFA as punishment for failing to pay their players' wages and transfer fees to other clubs on time.