Pep Guardiola believes Liverpool could be the “best team in the world right now”.
Manchester City, the defending Premier League champions, face a pivotal clash with Jurgen Klopp’s Reds at the Etihad on Thursday.
City, having lost three times in December, find themselves seven points behind the leaders ahead of this week’s showdown.
“With the position of Liverpool, if we drop points then it is over, it is finished; it would be almost impossible,” said Guardiola, after his side’s victory over Southampton.
“Of course they are going to drop points but not too many. If you want to be there as far as possible until the end, we have to remember what happened last season, and this as well, apart from the last few days.
“We won a lot of games but unfortunately we lost two and we have a rival who at the moment is the best team in Europe, or in the world.”
Liverpool, who thrashed Arsenal on Saturday, have not lost in 20 matches this season.
“Liverpool know what they have to do, we know what we have to do on Thursday,” Guardiola said.
“I know the distance is big, seven points, especially because they’re so solid and consistent. But we’re at home, hopefully our extra help from our people at the Etihad can help, they can support us.
“In the winter break everyone loses games, except for Liverpool in this period, but everyone drops points, that’s normal.
“We spoke about our responsibilities and what we are as a team and they did it today [against Southampton], and that was fantastic.”
Kevin De Bruyne missed Sunday’s Southampton clash with a muscular issue and is a doubt to face Liverpool.