The Ibrox men suffered fresh humiliation as they crashed out to Luxembourg minnows Progres Niederkorn after Tuesday’s 2-1 defeat.
Barton claimed his former Gers’ team-mates had lost out to a part-time outfit - who had never won a European clash before downing Pedro Caixinha’s team - who would only be good enough for the old ‘Unibond’ league set-up, or the seventh tier of English football.
But, while the former Ibrox midfielder knows the defeat will make many at the club re-think their ambitions of catching Celtic, he insists Gers should not reign in their ambitions.
He told talkSPORT: “You can understand the frustration of the Rangers fans. They have been to the depths of Scottish football and they are on the way back up. They are climbing back up that mountain and along the way there is going to be setbacks. It is not always going to go in a kind of fairytale way.
“The result last night does slightly change the trajectory of Rangers, certainly in respects of catching back up with Celtic and maybe overthrowing them.
“You can’t get away from it, it is a terrible result. It is arguably the worst result in British footballing history in Europe. But it shouldn’t change the direction of the football club.
“The football club should still be aiming to get back where it once was and that is at the pinnacle of Scottish football and dominating Scottish football. That is where it needs to aim it.”
And Barton - who admits he had never heard of Caixinha before his Ibrox appointment - reckons Gers can now concentrate on improving on last season’s third-place Ladbrokes Premiership finish.
He said: “I don’t know the Portuguese guy who has come in. I literally don’t know him - and I know a lot about football.
“He’s come in from off the radar. He could be a phenomenal manager. He hasn’t had time to show what he’s about yet.
“But from that perspective, the reality of it is Rangers were never going to win the Europa League. If Rangers are going to get closer to Celtic and Aberdeen this year, then they don’t really need to be in the Europa League on a Thursday night.
“If Rangers finish above Celtic this season, no one will care about what happened in the Europa League, while it is a really dark moment.”
Caixinha has signed nine new players this summer but few of the new arrivals have shown themselves to be better than the players the Portuguese coach inherited four months ago.
And Barton admits he was surprised to see the new boss jettisoning two of his former team-mates.
Andy Halliday has joined Azerbaijani outfit Qabala on a 12-month loan while Barrie McKay is closing in on a £500,000 switch to Nottingham Forest.
Former England midfielder Barton, who was forced to quit Gers last year after a bust-up with Halliday and Caixinha’s predecessor Mark Warburton, added: “Andy Halliday has left the football club and it looks like Barrie McKay is leaving too.
“From what I gathered from my time there was that these are people who know the club, certainly in Andy’s case.
“I’m not saying he would have made a huge difference but is someone who cares deeply about the club. He’s a supporter, he’s a fan. He’s got the club running through the ethos of his family. I want to see people like that (in the team).”