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Arsenal manager Arsene Wenger is refusing to meet Schalke’s £37million price for Julian Draxler.

Talks are still ongoing, but the German club are refusing to budge on the fee and also want the vast majority of the cash paid up front - which means the deal is unlikely to happen before Friday's 11pm deadline.

Wenger could still turn it round quickly if Schalke lower their valuation or demands - but it means the Gunners are now looking at other emergency options.

It is a setback for the Londoners' board - they are willing to back Wenger with the cash but the Frenchman believes £37m is too much for the 20-year-old German international.

Arsenal now face the risk of losing out on Draxler in the summer as well, with Real Madrid and Manchester City looking at developments, but Wenger is determined not to be held to ransom.

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It means he is now in the market for a loan deal and hasn't given up on Barcelona youngster Cristian Tello - even though Barca are reluctant to loan him as they want him as cover at the Nou Camp.

The Gunners have also enquired about Real Madrid’s Alvaro Morata and borrowing him would be ideal, as they would prefer to wait and go for a big name striker in the summer - when they are also likely to be back in for Draxler.

(Image: Thomas Niedermueller)

Another option could be Germany legend Miroslav Klose, now 35 years old, of Lazio.

Elsewhere, Arsenal insist Mirko Vucinic can't have turned them down - because they have never been in for the Juventus striker. They also say they were offered Fulham's Dimitar Berbatov, rather than the other way round.