The Mannschaft captain believes his side made crucial defensive errors against the Azzurri while Toni Kroos did not feel that their opponents were superior to them
Germany was billed as the tournament favorite throughout the championship and boasted a perfect record heading into the last four, but came up against a Mario Balotelli-inspired Italian side, which will now face Spain for the right to be crowned European champion.
Lahm was partially responsible for the second goal when he played Balotelli onside from a long ball and paid for his error as the maverick striker hit an unstoppable shot past Manuel Neuer to add to his earlier header.
The first goal also came after poor play from defensive duo Mats Hummels and Holger Badstuber and Bayern Munich fullback Lahm feels that the whole defensive unit was at fault.
"This is very bitter. We made dumb errors and conceded our goals. It is bitter because our team have so much potential," he said.
Lahm also appeared to be fairly self-critical as he chose to reflect on his early second-half miss as a turning point in the game.
With Italy 2-0 up, the 28-year-old shot over after engineering a clear-cut chance and despite Mesut Ozil's last-minute penalty, the Germans could not complete the comeback.
"In the second half, we gave our best efforts," Lahm added. "But we scored too late. I also had a great chance, but it wasn’t enough. If you are behind against Italy and have no luck, it is bad."
Young midfielder Toni Kroos also bemoaned his side's poor defending but refuted claims that the Italians had played better.
Kroos told ARD: "Both goals were easily defendable. But at the end it was not enough. We did not play worse than Italy and we had a lot of chances, especially in the first half."