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Manchester City have been cleared to embark on a huge summer spending spree after UEFA confirmed that Financial Fair Play restrictions on the club are being lifted.

City’s transfer budget was capped at £49million last summer and their Champions League squad cut to 21 players for breaching FFP regulations, both of which were blamed for their disappointing performance in the Premier League and Europe last season.

But the announcement by UEFA’s club financial control body on Friday has given City the green light to pursue their top summer transfer targets Raheem Sterling, Kevin De Bruyne and Paul Pogba, who will cost up to £150m if the club are successful in bringing them to the Etihad Stadium.

Wilfried Bony (left), a £28m signing last year, models Manchester City's new home kit with a fan

Pablo Zabaleta (left) also took a selfie with a City supporter to reveal the new design, revealed on Friday

Sergio Aguero could be joined by more star signings after City's transfer cap was lifted by UEFA

City have already had a second bid of £40m for Sterling turned down by Liverpool and know that Pogba will cost around £60m to sign from Juventus if they can fight off competition from Barcelona for the France midfielder. De Bruyne, who is set to hold talks over his future with Wolfsburg next week, would command a transfer fee in excess of £40m.

City are also understood to have stepped up their interest in signing England midfielder Fabian Delph from Aston Villa for £8m, having already agreed a £2m fee with Bursaspor for Turkey striker Enes Unal.

Chairman Khaldoon Al Mubarak last month promised a major investment in the squad this summer after City were held back by the FFP punishment. The Champions League cap forced Pellegrini to cut Stevan Jovetic from his squad in favour of January signing Wilfried Bony, effectively ending the Montengero star’s career at the Etihad.

Al Mubarak said: ‘We dealt with the pinch last year from Financial Fair Play, whether you agree with it or not. It’s behind us and we are out of it now.

‘I think this year will be an aggressive market. I expect it will be a huge market this summer.

‘I can assure you this squad will be stronger and the team will be more competitive. I am confident and excited about what is coming next year.

‘We want to go to the next level with a squad that has the capability and quality to win the Premier League and compete in and win the Champions League and go all the way in the two cup competitions in England.

‘You will see us in the market bringing high quality individuals to fit in with what we are aspiring to coming in this summer.’

Raheem Sterling is one of City's top transfer targets, and the club are now clear to spend big again

Juventus star Paul Pogba (left) and Wolfsburg's Kevin De Bruyne (right) are also top of City's shopping list

Fabian Delph could be a cheaper alternative from Aston Villa as City look to refresh their midfield

The FFP restrictions were lifted after City met the targets they had agreed with UEFA last year. Those included ensuring that the net transfer spend did not exceed £49m and the overall wage bill of the squad did not rise.

City also had to limit their losses for the last financial year to £16m. Club accounts showed a loss of £23m, but £16.3m of that was a UEFA fine levied as part of the FFP punishment and did not count towards the overall figure which has been scrutinised by UEFA’s accountants over the last few weeks.

The club’s financial situation looks a lot healthier after bringing in £36m from the sales of Alvaro Negredo, Matija Nastasic and Scott Sinclair, having already seen a substantial amount slashed from the wage bill by the departures of James Milner, Frank Lampard and Micah Richards.

City’s annual losses and wage bill will continue to be monitored over the next year, but a statement on Friday confirmed that the main restrictions had been lifted.

City crashed out of the Champions League against Barcelona after having to cope with a reduced squad size

Yaya Toure is on big money at City, who will still have to meet future financial targets set by UEFA

It read: ‘The UEFA CFCB (club financial control body) has lifted a number of restrictions on transfer activity, employee expenses and number of players in UEFA club competitions imposed on Manchester City FC after the club reached certain targets towards break-even compliance as part of the ongoing monitoring of their settlement agreement.

‘The lifting of restrictions is subject to ongoing additional controls and audits. The club remains under strict monitoring and has still to meet break-even targets and is therefore subject to some limitations in 2016.’

UEFA also confirmed the amount clubs are permitted to lose over three years is being cut from £32m to £21.3m from next season. However, they will be permitted a period of accelerated spending on players if they can prove they are not gambling on success.

The statement added: ‘The reduction has always been part of the evolution process of FFP and goes hand-in-hand with the other revisions that have been made in the updated regulations to strengthen FFP for European club football’s long term future.’