AS and Cadena SER are both reporting that Real have won the race ahead of Manchester City for the starlet, who shone in the recent under 21 European Championships Spain won.
It would be a slight surprise if only for the facts that Isco is thought to be a Barcelona fan and worked with Manchester City coach Manuel Pellegrini for the last two years at Malaga.
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Since Guus Hiddink arrived at the helm, Chelsea have improved considerably after a tricky start to the campaign.
Newcastle United are staring down the barrel of relegation to the Championship for the second time in the past eight years.