Without Rangers, Celtic have fallen short in one area according to Hamann.
Celtic are the unlikely beneficiaries of Rangers' promotion, Dietmar Hamann told TalkSPORT on Wednesday.
Rangers sealed their top flight place with a 1-0 win against Dumbarton on Tuesday and their manager Mark Warburton is targeting an immediate assault on the title.
Celtic, meanwhile, have been dominant in the absence of their rivals and are currently five points clear in their pursuit of a fifth straight league title.
Despite this, the Bhoys have struggled to translate their domestic displays onto the European stage, where Hamann believes they have been 'nothing short of pathetic'.
"Since Rangers were relegated, Celtic have been in decline," the former Liverpool midfielder explained during the Colin Murray Show. "Yes they've still won the league, (although) Aberdeen have given them a run for their money this season. But if you look at their performances in European football it's been nothing short of pathetic.
"I think it (Rangers' promotion) will spur them on to go that extra step again. Sometimes when you're so dominant in your domestic league you get a bit complacent and you may take your foot off the gas.
"I think it's great news for Celtic because, first of all, obviously they fill the stadium a few more times when Rangers are in town, but also in Europe they've got to be better because if you look back, five, eight, 10 years when (Neil) Lennon was there they played a last-16 match there against AC Milan (he means Juventus) and now they're light years away from that."
Celtic progressed from the Champions League group stage on three occasions throughout the 2000s, but have managed it once so far this decade.
Ronny Deila's men failed to get beyond the play-off round of this season's competition and exited the Europa League at the round of 32.
Celtic and Rangers meet in the semi-final of the Scottish Cup at Hampden Park a week on Sunday, with a potential European place at stake for the Gers.
The Bhoys look set to qualify for Europe anyway, via the league.