"Only Bayern, Schalke and Bremen can compete in Europe at the moment and if other clubs want to challenge this trio, they cannot do so without investors," Hamann told Die Welt newspaper.
"That is what puts foreign investors who want to invest their money in the Bundesliga off.
"If the German league wants to be competitive again, then they must knock down this hurdle. The gulf is getting bigger."
City have already splashed the cash in the transfer market, bringing in Brazil star Robinho on transfer deadline day for more than 40million euros, and Hamann, 35, is optimistic it is the start of something good at Eastlands.
"It seems like these people have really big plans and the signs are good," he said.
"You cannot buy success, but money certainly makes things easier.
"Take the example of Chelsea. Before Mr Abramovich arrived, they were only an average club and since then they have taken giant steps.
"The biggest challenge is to get a team on the field which pulls in the same direction and is not just a group of stars playing their own game.
"If we can avoid that, then Manchester City can catch up with the best teams in Europe and, maybe in five to 10 years, overtake them."