Madeleine: Two held over extortion

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But hopes are fading of a breakthrough in the hunt for the missing child after it was reported that the Italian had no connection with Madeleine's disappearance.

Spanish police said in a statement the pair were suspected of trying to swindle the McCanns, offering the parents information about the four-year-old.

But Italian diplomats in Spain were told by Spanish authorities that the man had no connection with the disappearance.

The pair were detained in a raid in the town of Sotogrande, near Algeciras.

Chief Inspector Olegario Sousa of the Portuguese Policia Judiciara said PJ officers accompanied the Spanish authorities on the arrest because of the potential link to Madeleine.

"Up until this point we haven't found any connection," he said. "But we are waiting to see what develops."

The Spanish police statement, which said the suspects were still being held, added: "Police began to investigate them after getting information that they had tried to contact Madeleine's parents to collect a reward."

The Italian was arrested on an international warrant issued from France, where he was wanted for alleged association with a crime group, police said.

He had served an 18-month sentence in France for child mistreatment, specifically his daughter, it said. A Spanish police spokeswoman said the warrant itself had nothing to do with the McCann case.