In extracts of his book "Europe doesn't need the euro", due to be published on Tuesday, Sarrazin argues that the euro zone is holding Germany to ransom over its past aggression, blackmailing it into agreeing to euro bonds or mutualised debt.
Supporters of euro bonds in Germany "are driven by that very German reflex, that we can only finally atone for the Holocaust and World War Two when we have put all our interests and money into European hands," Sarrazin wrote, according to extracts published in the Focus weekly.
'Germany is a hostage.' Thilo Sarrazin (Photo: Reuters)
Chancellor Angela Merkel's centre-right coalition is resisting EU pressure to back the introduction of euro bonds jointly underwritten by all euro zone members, fearing they would remove pressure on heavily indebted states such as Greece to put their finances in order.
But pressure has increased on Merkel to reconsider following Socialist Francois Hollande's victory in France's presidential election this month and the issue is expected to be discussed at an informal EU summit on Wednesday.
Sarrazin's new book has stirred heated debate among politicians even before it goes on sale.
"Either he is speaking and writing this appalling nonsense out of conviction or he is doing it with despicable calculation," Finance Minister Wolfgang Schaeuble told the Bild am Sonntag newspaper.
A leading member of Germany's opposition Social Democrats (SPD), Peer Steinbrueck, locked horns with Sarrazin on national television on Sunday evening, describing the theories in his 400-page book as worthless.
"It is pathetic that he is using the Holocaust to secure as much attention as possible for his euro bond theses," Greens leader Juergen Trittin told Monday's Die Welt newspaper.
"To spend money keeping the euro is a worthwhile investment for Germany," Trittin said.
Germany's agreement to bail out Greece reveals its "susceptibility to blackmail", Sarrazin wrote, alluding to crimes committed by the Nazis before and during World War Two.
"This politics is turning Germany into a hostage of all those in the euro zone who may in the future, for whatever reason, need help," he said.
Focus had a picture of the bespectacled, moustachioed Sarrazin, 67, on its front cover crumpling up a wad of euros.
Germany is the largest contributor to multi-billion euro bailouts of Greece, which faces a second election in just two months in June that leftists opposed to German-inspired austerity policies may win.
Sarrazin is lauded by some in Germany as an independent-minded breaker of taboos fighting for the interests of German taxpayers but is denounced by others as a preacher of hate.
He shot to notoriety in 2010 with a book entitled "Germany does away with itself" (Deutschland schafft sich ab), a bestseller that exposed a deep rift in German society over its integration of immigrants.
The book accused Turkish and Arab immigrants of exploiting Germany's welfare state, refusing to integrate and lowering the average intelligence - arguments that led to his resignation from the Bundesbank, where he was a board member, and which still cloud immigration debates two years after publication.