Pep Guardiola admits Manchester City lack the “mentality” to compete with Europe’s elite and plans to address the problem in this summer’s transfer market.

City, who travel to Southampton on Saturday, crashed out of the Champions League when they were defeated 3-1 by Monaco in the second leg of their last-16 tie.

And Guardiola, who spent in excess of £160m last summer, feels his squad are lacking "not in terms of quality" but rather in their collective mind-set and ability to perform in high-pressure situations.

"We see in the Champions League that level [that those teams are at] and the quality they have," Guardiola explained.

"But it is not just the quality, it is the mentality and the presence to play at that level. Of course we have to make changes for next season.

"It is how they play in big situations. We lived those situations in the Monaco game so we do not forget how good they are.

"We were able to score six goals in two games but we are out. That means it is how you handle the whole situation over 180 minutes. For that you need experience.

"Hopefully that experience will help us for next season."

When asked how far City are from teams like Juventus and Real Madrid, Guardiola admitted: "We are far away."

Pep Guardiola is happy with Sergio Aguero's recent form

One player who has been linked with a move away from the Etihad Stadium this summer is Sergio Aguero, who was dropped for young Brazilian star Gabriel Jesus earlier in the season, but the Argentinian has enjoyed a resurgence in recent weeks.

An injury to Jesus opened the door for Aguero to reclaim his starting spot and Guardiola took time on Thursday to praise the 28-year-old.

Explaining his improvement, Guardiola said: "I have said many times he is now involved [more] in the game. My feeling before was he was just waiting to score a goal because he has this quality.

"But now he is involved in the game. Not just in the defensive part where he has helped us a lot and has done all he can do but also in our process to create the chances, so no complaints about what he has done since the injury to Gabriel."

When asked if Aguero's attitude has improved, Guardiola replied: "It was always good, from the beginning - I said that many times. We had no complaints.

"He is just now maybe understanding better what we are looking for but he is trying and that is what I want.

"After that, if he misses chances or misses other things, always you can improve but I have no complaints."

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