The English champions have been talking to the Serie A clubs in the past 24 hours with Milan widely reported to have offered around 20 million euros plus add-ons for the 22-year-old but this has fallen short of City's price tag.
City have not been actively trying to sell Balotelli, who has never been far from the headlines with a series of on and off-field antics, but if he were to leave the club in this month's transfer window it would not be on a loan deal.
Balotelli joined City from Inter Milan in 2010 for around 22 million euros and has had a sometimes troubled time at the club, including clashes with manager and compatriot Roberto Mancini and disciplinary issues.
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