Khedira has emerged as a key priority for both the Gunners and the Blues, and despite his agent denying a deal is close, he remains on their list of targets.
However, with neither club yet to reach his £150,000-a-week wage demands, Spanish newspaper El Confidencial says Khedira is now considering staying at Madrid.
The 27-year-old rejected a new contract offer two weeks ago but these new reports say he is considering re-opening talks over a fresh deal.
Madrid want a resolution on the player’s future this summer – as he only has 12 months left on his current contract and could leave for free at the end of the new season.
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