Stuttgart are in Rangers' Champions League group and struggling to reach the knockout stages yet 22-year-old midfielder Sami Khedira and Germany international Roberto Hilbert have caught the eye of the scouts.
"Even for us, in the German league it isn't easy to hold on to our star players," Babbel told the News of the World.
"I know for sure every week we play, Manchester United, Tottenham and other English clubs are watching our games.
"So many English teams are turning up at our games every week now, watching our players. So it's not easy to hold on to the best players any more. Even at a big Bundesliga club like this.
"Of course, our players can earn good money here and are well rewarded. But if they go to the Premiership, Spanish League or Italian League they realise they will make much more money than in the Bundesliga.
"It's not easy to build a fantastic team and hold it together in these circumstances."