Roberto Mancini beats Alex Ferguson again as he signs deal worth £37.5m at Manchester City

Manchester City secured Roberto Mancini as the man to take them on their onward quest for Continental domination by yesterday making him comfortably the highest-paid manager in the Premier League with a new five-year deal worth £37.5m.

The £7.5m-a-year contract does not take Mancini into the realm of Jose Mourinho's £10m a year at Real Madrid but it is substantially more than Sir Alex Ferguson, who is estimated to command around £4m a year, and it is a huge declaration of faith in a manager whose future was by no means watertight during the wobble when his club almost sacrificed the title to Manchester United in April.

Mancini appears now to have accelerated into a position as Europe's second best-paid manager, after Mourinho, given that Pep Guardiola's successor at Barcelona, Tito Vilanova, does not command his level of salary. Carlo Ancelotti at Paris St-Germain and Guus Hiddink at Anzhi Makhachkala are unlikely to command as much as Mancini now does.

The deal, which more than doubles Mancini's previous £3.5m-a-year salary, comes days after the Russia football federation emerged as a contender for his services, ready to capitalise on the fact that he had only a year left on his previous contract by taking him to Moscow for £6m a year. City were unmoved by that suggestion at the weekend, when they insisted discussions with the Italian would reach a conclusion after protracted discussions between both sides which have gone on for two months.

One of the question marks over Mancini was his impatience with the unwillingness of the club, as he has seen it, to move rapidly into the transfer marker. There is frustration, for example, that no bid has yet been made for Robin van Persie by City's football administrator, Brian Marwood. But Marwood, whose task is to ensure that the club move towards compliance with Uefa's financial fair play regime, wants players off City's books before another move for a player who may command around £200,000 a week. City reject in the strongest possible terms suggestions that the Dutchman has been shown around properties in neighbouring Cheshire.

Although the relationship between Mancini and Marwood has been challenging at times and there is an acknowledgement that the Italian's nurturing skills could be better at times, where some of his players are concerned, the delivery to the club of a first title since 1968 has strengthened his negotiating position. Since the dramatic final day of the season, the prospect of him not extending his deal and being at the Etihad at the start of next season has seemed unthinkable.

The club stated: "Manchester City are pleased to announce a new contract has been agreed with manager Roberto Mancini. The deal, which runs until the summer of 2017, follows the club's most successful season in more than four decades, which concluded in the most dramatic of circumstances in the team's thrilling 3-2 win over Queen's Park Rangers in May."

Now Mancini must knuckle down to develop his working relationship with Marwood, who knows better than the manager that losses of £197m must be reined in. City could balance their transfer spending by offloading the likes of Edin Dzeko, Carlos Tevez, Adam Johnson and Emmanuel Adebayor. For his part, Mancini has insisted that if City are to become a serious contender for European honours, they must follow the blueprint laid down by Spanish giants Real Madrid and Barcelona.

"Barcelona and Real Madrid every year buy two or three players and spend a lot of money," Mancini said at the end of the season. "I think for Manchester City it will be the same."