Italy striker Mario Balotelli scored twice to send the Azzurri into the finals of the European Champions which will be played against defending champions Spain in Kiev on Sunday.
Germany, who were tipped favourites prior to the tournament after winning 15 successive competitive matches, couldn't find a way through the unbreakable Italian defence. Loew's young guns were left emotionally crushed after 2-1 loss against a more experienced Italian side.
"There are tears flowing in the dressing-room. The dressing-room is as quiet as a mouse because no-one wants to speak a word," Loew was quoted as saying in ESPNsoccernet.
Loew highlighted his side's defensive errors and Mario Balotelli's sheer determination, which led to Germany's elimination.
"They punished us for our mistakes and went into the break 2-0 down against such a classy side as Italy, so it was always going to be difficult to get back into it," he said.
"Balotelli is a talented player, we knew that, but he punished us with two goals and we were not entirely free from errors in those moves," he added.
Defending his young side, Loew squashed suggestions that his team were choked, but insisted they played well throughout the game.
"We've had two great years," said Loew. "The team has really developed well. We won 15 games in a row but lost today against an incredibly strong Italian side, with a strong axis and two great strikers. There's no reason to doubt ourselves. Our team was the youngest team here."
"Even though there's disappointment today, we played a wonderful tournament and I am sure we will be able to cope with this defeat," he said.
Having opted for Andre Schurrle, Marco Reus and Miroslav Klose, who impressed in the quarter-final win against Greece. Loew brought back Mario Gomez and Lukas Podolski to the starting XI while Toni Kroos started his first game after making substitute appearances for just 18 minutes in the tournament.
"I could've used another line-up, but Gomez had scored three goals and Podolski netted too, so I thought it was right to play them together," he said.