Speaking by phone from his home in Newcastle, where he was both a player and later assistant manager to Kevin Keegan, the 65-year-old said that Liverpool's current squad was slightly too shallow to mount a title challenge.
"We haven't got that strength in depth. We've got some great players, a fantastic manager, I think if you had the choice of any manager right now you'd go for Juergen Klopp, he's a breath of fresh air," McDermott told Reuters.
"He shows his emotions, whether it be good or bad, but he's going to be fantastic for the next four or five years."
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The departure of the influential Sadio Mane to the African Cup of Nations in January coincided with a slump in Liverpool's fortunes, something McDermott says illustrated the need for a deeper squad.
"If you'd asked me in December, could Liverpool win the league, I'd have said yes," he explains. "Then we had that horrible month where we fell apart because of that strength in depth."
For McDermott, it is crucial that Liverpool address that issue in the summer, but to do so they will need to nab a spot in Europe, and preferably the Champions League, if they are to attract the best players.
"When you're in Europe, you've got a better chance of bringing in quality players rather than your second- or third-choice players," he said.
"You want to bring in the number one, not the number two or three. They'll only come if you're in Europe next year, so it's imperative we get into Europe."
English teams are no longer feared in Europe the way they were in McDermott's playing days, but he still believes they can make an impact.
"There's not one (English) team there that stands out, that you'd say they're certain to win a European Cup" he said.
"I honestly thought Man City might have had a chance this year, but they've dropped points when you'd least expect it, getting beat by inferior teams," he said.
McDermott had two spells as assistant manager at Newcastle United - the first of them with Kevin Keegan's thrilling side that almost won the Premier League in 1996 - and was also number two at Huddersfield, Birmingham and Blackpool, but he said he had no ambitions to manage a club himself.
Born in Kirkby, McDermott says he "absolutely loves" Liverpool and considers it a privilege to have been such a big part of the club's history.
He revealed that he had been asked to write the story of his life in football many times, but that it was his family that convinced him to finally commit his memories to paper before they fade away.
"I did it to keep the family quiet really! But you know what? It's the best thing I've ever done," he said. "There are things you remember like they were yesterday - European Cup finals, goals against Everton - but some things you do forget."
He still attends every home game, and like the rest of the capacity crowd there, he longs for the day when the Premier League trophy is lifted at Anfield.
"We all pray that at least once in the next few years (that it happens). I'm sure they're capable, but it all depends on who Klopp brings in," he said.
(Reporting by Philip O'Connor; Editing by Andrew Heavens)
