The former Bayern Munich man is confident that die Mannschaft can go all the way at Euro 2012, and added that the other semi-finalists fear Joachim Low's side
Die Mannschaft lock horns with Italy in the semi-finals, while titleholders Spain take on Portugal, and Babbel is confident that his country can go all the way in Poland and Ukraine.
"Germany definitely have the potential to win the Euros. Other teams have recognised this and are playing scared, lining up very defensively against them," Babbel was quoted as saying on the official Fifa website.
"Germany versus Spain would definitely be my dream final and I'm convinced that [Germany] can beat the reigning World Cup and Euro holders.
"Joachim Low's team look to be a little fresher in my opinion, whereas Spain might have lost their hunger for success."
The 39-year-old then looked ahead to the semi-final match versus Italy, and stressed that the Azzurri will be no pushovers.
"Italy are tough to gauge," he continued. "They have two top stars in Antonio Cassano and Mario Balotelli, but both of them are the type of flamboyant player that can make a coach want to tear his hair out.
"Italy can cause any of the big teams problems at any time."
Thursday's encounter kicks off at 20:45CET.