The centre-back has not played for his country since an error in a 3-1 defeat to Holland in the semi-finals of the Uefa Nations League in June.
England’s manager left the City defender out of his XI to face Switzerland a few days later and a muscle injury saw Stones miss out on international duty in September and October.
He has played five times for the Premier League champions since a return to full fitness, though, and is expected to start Sunday’s top-of-the-table clash against Liverpool at Anfield.
“We know the quality he has. He played such an important part in our run to the World Cup semi-final, on the way to the Nations League and then had a really difficult period at the end of last season and beginning of this with injuries,” Southgate said.
“I think it’s a very important spell for him with his club. Clearly there’s always competition for places at a club like City and if you can establish yourself there, then you’re in a good place to be in good form when you come with us.
“As I say, the games that he’s played in so far he’s looked absolutely fine, but they are not always tested without the ball and I think Sunday they certainly will be.”
Southgate – like he did after Stones’ mistake against Holland – praised the bravery of the former Everton defender and insisted he was focused on the present, not the past with the 25-year-old.
He added: “It’s more important to me how he’s playing at this moment with his club.
“I think I said after that (Holland game), I didn’t play him the game after because I felt he wanted to be in a confident place when he next played for England and if he can come through this weekend strongly, then that’s where he’d be I would think.”
Up to six of the players in the 27-man squad could feature in the encounter between Liverpool and City. Although Southgate would prefer to see the number even bigger, he admitted it is those type of games he wants his internationals to feature in.
“I think, in the ideal scenario, you want players that are playing Champions League football, playing in matches where they’re pushing to win trophies because the extra pressure that comes with those games is what you have to deal with with England,” Southgate said.
“When you’re playing for big clubs, there’s a responsibility to perform every week. With lesser clubs, sometimes you can lose and there isn’t a big inquest.
“There is of course within the club and locally, but with the big clubs that’s national. The profile is just bigger and it’s closer to what they face with the national team.
“Everybody’s a bit calmer, generally, in those more regular league games, but these top-of-the-table clashes, you really find out more about individuals and you see the best against the very best, and that’s what we’re going to face in the European Championship.”
Southgate also discussed Chris Smalling, with the Manchester United defender impressing on loan at Roma.
“There’s no point in bringing Chris in, in the way we would with someone like Fik (Fikayo Tomori), who’s a young player, who to be with us and to train with us is important,” he added. “Chris has got a lot of caps and if we were bringing him in, it would be to play really and so that wasn’t a consideration for this time.”
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