Barton, 28, has shown a willingness to take a ?1million a year pay cut in order to extend his career at Newcastle but wanted a three year extension to his current deal which runs out in 18 months time.
However, Newcastle are understood to have told him they are only prepared to tie themselves into a two year deal.
'Take it or leave it': Barton (right)
Barton, who called for the club's hierarchy to back manager Alan Pardew in the summer by spending the ?35m they received for Andy Carroll on rebuilding the squad, has been left disappointed by the offer as he had hoped a compromise could be negotiated to reflect his willingness to take a pay cut and be part of the club's long term future. That now looks in doubt.
Bundesliga side Hamburg and Aston Villa remain interested in Barton and will contemplate a move for him in the summer if the situation remains unresolved.
Barton's representative Willie McKay said: 'Joey just wants to get his head down and concentrate on his performances. He is determined to build on his displays this season and push himself back into the England reckoning.'
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Explore more:People: Joey Barton, Andy Carroll Places: Newcastle, United Kingdom