Liverpool midfield target Lewis Holtby will not sign a contract extension with Schalke 04, according to The 22 year old Germany international is in the final year of his deal with the Bundesliga club and despite protected negotiations, an agreement seems unlikely.

Lewis Holtby (L)

An earlier report strongly linked the Reds with a move for the youngster (whose father is from Merseyside, although he supports Everton) earlier this year. However, Brendan Rodgers may well face competition for his target, with the Daily Mail having reported north London club Arsenal also had an interest in the player.

Should Holtby not sign a contract before the start of the mid-season transfer window, under the Bosman ruling he will be free to talk to other clubs about a potential transfer in the summer of 2013.

Liverpool are expected to confirm the £12m transfer of Daniel Sturridge on 2 January and the Reds have also been linked with Wigan Athletic's Franco Di Santo. And with news academy product Raheem Sterling has signed a long-term professional contract the Anfield club could boast a very exciting and young attacking line for 2013, if this raid on the Bundesliga were to come off.

The Gunners, meanwhile, are struggling despite the high-profile signings of Santi Cazorla, Olivier Giroud and Lukas Podolski. Although Arsene Wenger's men are better placed in the Premier League, a relative seventh to Liverpool's tenth, poor performances like that against Bradford City and Swansea City have increased pressure on Wenger and the board to spend on new players. And Holtby might prove to be a valuable buy on the cheap, something Wenger will likely appreciate.

There is some good news for Schalke though, with confirmation Dutch striker Klaas-Jan Huntelaar has signed a new contract. The 29 year old former Real Madrid, AC Milan and Ajax forward was also out of contract in the summer. He too was linked with a move to the Premier League as well, with Arsenal believed to be leading the chase. However, the Dutchman has now signed on with the club through to 2015.