The Sky Sports pundit previews a mouthwatering Anfield clash he describes as "pivotal" to the seasons of both Manuel Pellegrini's title chasers and Brendan Rodgers' top-four hopefuls.
City head to Merseyside after a 2-1 Champions League last-16 first-leg defeat that belied Barcelona's dominance, while the Reds suffered a penalty-shootout defeat to Besiktas to bow out of the Europa League.
But the former England defender reckons there's a silver lining to Liverpool's spot-kick agony in Istanbul....
Of course it's disappointing that Liverpool have gone out of the Europa League - there's Champions League football at stake as well as a trophy.
But I don't think it's the worst thing for Brendan Rodgers' side, who, in my view, played pretty well in the first half before tiring as the match went on.
Rodgers has always said that winning a trophy and making the top four would constitute a great season and I totally agree. Liverpool have still got the FA Cup - and going out of the Europa League will make it a lot easier for them to get into those Champions League places.
I'm looking at the bigger picture. I've got a hunch Liverpool will look back at the Besiktas result and think it was the best thing in the long run.
City should be in a better state physically, having had an extra couple of days to prepare, but mentally it could be a very different matter.
The message from Rodgers and his staff will be: 'We've got to get into the top four another way now and going out of Europe gives us a better chance.'
The Europa League isn't as prestigious as the Champions League so Liverpool should be able to shake off the disappointment more quickly.
City might not have gone out of the top club competition just yet but in the back of their minds, they'll know how close they are.
You build yourself up all season for the Champions League and when you're seen as one of the top clubs it's a massive blow to be on the brink.
Having said that, what an incentive for Pellegrini and his side on Sunday.
With Chelsea playing in the Capital One Cup final, City have a chance to cut the gap at the top to just two points. That would give them a massive psychological lift. It might just put a doubt in Chelsea's mind - even if they have got a game in hand.
Liverpool got that big win at Southampton when sides around them slipped up and after a stuttering start to the season, the top four is definitely there for the taking.
The belief they would gain from beating the champions would be massive - not least because they'll have a few free weekday nights now.
Make no mistake - this is a pivotal game in the context of both sides' seasons.
City have got some of the best players in the world in the likes of Sergio Aguero and Yaya Toure. The impact Toure, back from suspension, can have on these types of games is huge.
But I look at the way Liverpool played in their 3-2 win over City last April - the match that was billed as a title decider but turned out not to be.
Rodgers played Raheem Sterling off the front in a diamond formation and he caused all sorts of problems.
Liverpool play slightly differently now with a back three but - especially if City play 4-4-2 again - Sterling could be the key.
It's set up to be a really good game. Liverpool won't be as fresh but they should go into it full of confidence after victory at St Mary's - and with a renewed sense of focus.
Watch Liverpool v Man City live on Sky Sports 1 on Sunday from midday.
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