In an eventful game in Tilburg, Germany drew first blood in the 19th minute when Josephine Henning headed home after Italian keeper Laura Giuliani spilled the ball following Dzsenifer Marozsan's free-kick.
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Italy equalised from a counter-attack 10 minutes later as Ilaria Mauro nutmegged German keeper Almuth Schult after a pass from Barbara Bonansea who had sprinted down the whole length of the left wing.
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Peter scored from the spot on 67 minutes after Giuliani had brought down Anja Mittag in the box, and a minute later Italy were reduced to 10 players as defender Elisa Bartoli picked up a second yellow card.
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Germany hit the post twice -- Sara Daebritz in the first half and Mandy Islacker in the second -- while Bonansea saw her free-kick cleared by a diving Schult with 10 minutes to go as Italy were eliminated.
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"I think this was a great Italy," said Italy coach Antonio Cabrini. "We played on a par with a much better team than us. We had a great 70 minutes and believed in it to the very end."
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In the other Group B game, captain Lotta Schelin and Stina Blackstenius powered Sweden to a 2-0 win over Russia.
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