Manager Arsene Wenger remains hopeful Theo Walcott will agree a new contract at Arsenal - but indicated the club could allow him to leave if no deal can be struck.

Walcott, 23, is into the final season of his current contract but has yet to negotiate an extension, with the two parties said to be at an impasse over wages.

"I still hope to sign him and the next two months will be vital because after that, the longer this situation lasts, then the more difficult it is," Wenger said. "Let's hope we can find a solution in the next two months."

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