The Rojiblancos are unlikely to retain Diego next season and have identified their former player, who is believed to be unhappy with his situation at Schalke, as a replacementAtletico Madrid are attempting to push through a deal for Jose Manuel Jurado after tabling a bid of €5 million for the Schalke midfielder, according to AS.
The capital outfit are desperate to land a new attacking midfielder as loanee Diego is due to return to parent club Wolfsburg on July 1 and there is no sign of a permanent deal being agreed upon.
However, the paper claims that Atleti will not pursue negotiations with the German side and instead have looked closer to home for an alternative in the form of ex-player Jurado.
The 25-year-old originally left the Vicente Calderon in 2010 to join Schalke for €13m and enjoyed a productive debut campaign, as he helped the Royal Blues into the semi-finals of the Champions League.
However, his sophomore season has been disappointing, having failed to score in just 18 Bundesliga appearances, and he is being tipped to be offloaded by the Bundesliga side this summer.
Jurado, who is under contract with Schalke until 2014, has already ruled out a move to China's Super League or to Greek champions Olympiakos, paving the way for a possible return to Atleti.
It is also believed that he would be willing to take a considerable pay-cut in order to rejoin the club he represented between 2006 and 2010.