Xabi Alonso is already under pressure for losing both in the champions League and the league, they lost against Manchester Celta Vigo in the league before going to the champions League to lose against Manchester City, they are in the second in the league and still trying not to miss out in the champions League knockout stage. From the performance of Real Madrid I don't know if they will qualify to the next stage in the champions League even though they qualify they are not going to make it to the finals unless they improve in their performance and their players come back from injury.
I don't think their place in the Champions League is that ugly, Manchester City are good than them right now but better to be at top 8 than be nothing or below the top 8. There is just 2 matches away from here, if they can contain those two matches and advance further, they can comfortably goto next stage where I think by that time, they should be stable at the every position in any league, I have seen some things bad here but get better with time.
If you can remember, Real Madrid never had loss in the beginning, they were following Arsenal until they loss. You can see that Arsenal is at the top cruising well and don't have any challenges here but they are having problems in their domestic league. A time is coming that Arsenal will have issues in both Champions League and the Premier league, I don't see them winning the two league for now, it's the team we don't see on the table bits their watching everyone right now.