Xabi Alonso has snubbed a return to former club Liverpool, by agreeing a lucrative new two-year-contract with Real Madrid, according to the Metro.

Spanish international Alonso has been heavily linked with a return to Anfield, four-and-a-half years after leaving Merseyside for the Spanish capital in a £30million deal.

But now the 32-year-old – who has also been linked with both Chelsea and Manchester United – has agreed a two year extension worth £5million a year, with the option of an extra year.

Alonso confirmed the news on his Twitter page, posting a photo of inside the Bernabeu stadium with a caption that read: “This will continue to be my home for two more years. A pleasure to let you know. Very, very happy.”

His decision to stay in Spain comes as the third major blow to the Reds in quick succession.

Real Madrid boss Carlo Ancelotti has blocked their attempts to take striker Alvaro Morata on loan, while FC Basel winger Mohamed Salah is set to now reject a move to Anfield in favour of a switch to Russian side Zenit St Petersburg.