The delaying tactics employed by Barcelona club Espanol have brought the deal crashing to the ground as they have failed to meet the terms of a contract agreed with the Premiership champions a week ago.
Manninger's £1m transfer is likely to be formally scrapped later today by Arsenal because the terms of the agreement state that Espanol had to send David Dein a bank guarantee for the full amount prior to yesterday's opening of business.
By the close of business yesterday Arsenal had not received such a guarantee and, having given Espanol a full extra day's grace, the club's patience has run out.
Even the late arrival of a full financial guarantee this morning is unlikely to avert the collapse of Manninger's move to Europe's strongest league and Arsenal are thought likely to invite bids - with Celtic having made it clear they can afford both the transfer fee and the player's wages.
Espanol assert that they have deposited money with the Spanish Football Federation and that a fax was sent to Arsenal by the Spanish Federation last night. But Arsenal are not thought to have received anything and their mood is such that only payment of the million-pound fee in full, rather than six instalments as initially agreed, might alter their disposition.
Manninger himself will be bitterly disappointed, having arrived in Barcelona last Saturday in readiness for a formal presentation to the hungry Spanish media, only to be forced to return to Austria because of Espanol's inability to close the deal.
The player feels he has given his word to the Spaniards, signed a provisional contract and wants to play in Spain.
But with Arsene Wenger seemingly showing no more faith in Manninger than during the last two seasons, his career is destined to move on, probably to Glasgow.
And a former Gunner may be on his way back to the Premiership. Brazilian Silvinho, reportedly armed with a new Italian passport, has been linked with a move to Newcastle United.
The left-sided player, who departed Highbury for £3.5m in 2001 to Celta Vigo under a cloud regarding his Portuguese passport, has now qualified as an Italian national through his wife, and is considering a move back to England.
