Liverpool manager Rafael Benitez says he has funds for another signing after capturing England full-back Glen Johnson from Portsmouth for somewhere in the region of €20million. The Spaniard today defended the massive outlay on a defender, insisting the club has to spend big to compete.

Johnson is expected to sign a contract this week, after choosing the Merseysiders over a return to Chelsea and agreeing terms last night. He could yet be joined by another newcomer, according to Benitez, who says he will only have to sell if he looks for a third first-team signing.

“You can’t compete in the top four of the Premier League unless you spend some money,” Benitez said today.

“We were looking for a player of quality and also somebody who is British because of the new Champions League rules. Glen Johnson fits both categories.”

The Spaniard added in the Liverpool Echo: "We have a plan. We can sign one more player if necessary, but that's without any players leaving."

Benitez, it seems, would like to raise funds through the sale of the loaned out Sebastien Leto and Andriy Voronin, while Andrea Dossena could return to Italy if Juventus back up their interest with an offer.

However, Benitez also admitted today, full-back Alvaro Arbeloa may have to make wa, with Real MAdrid the likely destination if he does.

“Alvaro Arbeloa has had a very good season but he has one year left on his contract,” he said. “If he signs that will be good because we will have more competition, but if we get a good offer we will have to consider it.”

Real also appear to be consdiering it. Speaking this afternoon sporting director Jorge Valdano admitted Arbeloa is an option.

"The lad only has a year left on his contract with Liverpool and this gives us more possibilities," Valdano said. "He can play in two or three positions and this versatility is good. He is another option to evaluate."

An inquiry about Xabi Alonso would be less welcome, as Valdano is aware, but Real's interest has not waned.

"We have possibilities there but I don't want to say anything that will make the negotiation more difficult. We will wait a reasonable amount of time," Valdano told sports daily As.

Javier Mascherano, meanwhile, is also shifting uneasily, thanks to interest from European champions Barcelona and their bitter rivals.

"I am very proud and thankful for the interest from Barcelona and Real Madrid. It's good for me to have these two teams interested in me," he reportedly told Don Balon.

"Both teams are very important but at this moment, I think that Barcelona is a little bit better and that's why they've won all that they have."

Liverpool have also signed Spanish teenager Jesus Joaquin Fernandez (15) from Cadiz and English youngster Aaron King (16) from Rushden and Diamonds.