It had been widely assumed that, had he left Palermo at all, it would be for PSG, as his wife resides in Paris. So this is quite an interesting and exciting development, €5M for a player of his caliber would seem quite the bargain. Adding Balzaretti would certainly go a long way to meeting Roma's dire need for a fullback.
However, at this point, it's far from being a reality-as always, stay tuned.
Updates as of July 30th:
Balzaretti has asked his agent for more time to consider his options. Reports indicate that Roma has offered €4.5M for Federico, while Lazio chimed in wtih €4M, though their wage offers are the highest of his suitors (Roma, Lazio, Napoli).