The Basque was almost sold in the Summer but has put that behind him to have possibly his best season yet for Liverpool, and has become a vital part of Rafa Benitez's plans.
"The first year was really good and this year he is also playing really well," said the boss.
"Xabi has been having a very good season; he has been playing well in a lot of games and is a key player for us.
"We have a lot of confidence in him because he is playing really well and he is a player we want to keep because he has the quality, and the game, that we need."
