Ozil sparked unrest ahead of that tournament when pictured with Turkish president Recep Erdogan, with further uncomfortable questions asked during and after a shock group stage exit.
He has now decided to rule himself out of contention, accusing the DFB of racism, while his agent has been forced to hit out at outspoken critics such as Bayern Munich president Uli Hoeness.
Former Germany captain Matthaus admits an unfortunate situation has been difficult for all concerned but feels Ozil has been a fading force for a few years, telling ESPN FC: "I think football is football, politics is politics.
"Mesut made a good job for Germany in [previous] years but in the last one-and-a-half years he didn't hit the same performance like four years ago when we won the World Cup in 2014 in Brazil against Argentina.
"I think his time to play in the national team is over. Not because of some picture, political decision. It doesn't matter, I don't care. I see the football player Mesut Ozil and he didn't perform like before."
Pressed on whether Ozil will be missed by Germany heading forward, 1990 World Cup winner Matthaus added: "No, we have a lot of good players, and when some player cannot perform like before, we have options to give the new generation the chance to help us to make the results like, for example, 2014."
Matthaus was reluctant to be drawn on Hoeness’ comments in which he suggested that Ozil has been “sh*t for years”, with the Bayern Munich ambassador preferring to look at the bigger picture when it comes to a team and player in transition.
He said: "I never speak against Uli Hoeness, but OK, Uli Hoeness was very angry this morning because this was too much the last two months about Mesut Ozil.
"The German team lost the games against Mexico and South Korea, not only Mesut Ozil. But Mesut Ozil was - is - a part of this national team. And he's normally a leader but in the last one, two years, he didn't show he's a leader, he didn't show the right performance.
"And then all the things were coming from outside - include it and everything else, and this makes a story.
"But for me, it's only important [if] Mesut Ozil can help the national team or not, and I have this feeling in the last one-and-a-half years, he never played on this level how we played before, and now it's time for changes. It's time for changes!"