Benitez victorious as he signs new Liverpool deal

Spanish manager agrees five-year contract to end stand-off with owners

Rafael Benitez committed himself to Liverpool for the long-term last night, signing a new five-year contract which represents a victory in his battle to wield greater power at the club.

The Spaniard has been at odds since January with the club's owners George Gillett and Tom Hicks, demanding greater control over football issues including his transfer budget and the club's Academy. Benitez will by no means secure carte blanche to spend without his board's sanction. "Transfers will still be handled by the new CEO and owners, based on Rafa's recommendations," one executive familiar with the contract talks said last night. But the balance of power has clearly swung towards him and away from the chief executive's office – where incumbent Rick Parry's departure was announced last month. The exit of Parry may have helped secure 48-year-old Benitez's signature on a deal worth over £4m a year which should keep him at Anfield until June 2014 and extend his career at the club to a decade, should he see it out.

"My heart is with Liverpool Football Club, so I'm delighted to sign this new deal," said Benitez, who arrived from Valencia in the summer of 2004. "I love the club, the fans and the city and with a club like this and supporters like this, I could never say no to staying. I always made clear I wanted to be here for a long time and when I complete my new contract it will mean I have spent over a decade in Liverpool. The club is greatly respected around the world due to its incredible history and tremendous heritage. It is my aim to uphold those values and help create a new chapter in our history."

Though Hicks and Gillett believe in a chief executive holding the kind of powers David Gill enjoys at Manchester United, they were persuaded by Randy Lerner at Aston Villa that a deal allowing Benitez similar control to Martin O'Neill could work.

Amid the threat of Real Madrid seeking Benitez this summer, the Americans needed to retain a world-renowned manager to maintain the optimum financial value of a club for whom they seek investors. Hence a salary which takes Benitez from his current £3m-a-year wage to something like the figures commanded by Sir Alex Ferguson and Arsène Wenger.

It is an outcome which seemed highly unlikely in October 2007 when Hicks and Gillett, antagonised by Benitez's response to their demands that he work through Parry and dubious about his capabilities, sought out Jürgen Klinsmann as a possible successor. Hicks has since had a rapprochement with Benitez but the relationships with Parry and Benitez were damaged fatally.

Parry's announced departure does not seem to have lifted Benitez's mood of late. Even 10 days ago, before the home leg of Liverpool's Champions League tie with Real Madrid, he did not seem to be in high spirits and he is yet to express much pleasure at the prospect of working with a new chief executive. But the wins over Real and Manchester United have since cemented Benitez as the most serious challenger to Ferguson since Jose Mourinho's star began to wane. The new contract also paves the way to new deals for Daniel Agger, Dirk Kuyt, Alvaro Arbeloa and Fabio Aurelio, whose own contract talks had been on hold pending uncertainties about the manager's future being resolved.

Benitez hinted on the day Parry announced his departure that a new deal was dependent on him being granted the security of knowing who the future owners of the club might be. That appeared to be an impossible request, considering the uncertainty still surrounding the finances of the club and the Americans' as-yet putative search for buyers in the Middle East. Some assurances may have been given but Benitez, who has always insisted that the length of the contract and remuneration were not issues, appears to have concluded that the departure of Parry, bringing him the kind of autonomy he has been looking for, is enough.

Hicks, who has been actively courting a consortium including the Kuwaiti Al-Kharafi family to secure new invest in the club, said last night: "It is wonderful news that Rafa has made a long-term commitment to the football club. He has been responsible for the great progress we have made. I know he will continue to build on his achievements as he has a tremendous hunger and desire to bring more success to the club – success our fans and everyone connected with the club deserves."

Gillett, the more likely of the American pair to sell up, added: "With Rafa continuing to manage the team, we can look forward to more great football and success on the pitch. He has special abilities and qualities which are admired here at the club and around the world. Coming after our excellent wins over Real Madrid and Manchester United, this gives us great momentum going into the final stages of the season."

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