Italy aren't a good team, but they have more brains that the Germans who seemed to go through all sorts of varying levels of emotion. Italy was more professional, and Balotelli happened to put them away.
That doesn't mean Italy are suddenly brilliant. They've been the best at nothing this entire tournament. This was the first team of note they actually beat (i.e. not on penos) and it'll be their last I'm sure. Fucking hate Spain, so I'll be hoping Pirlo lifts it, but I wouldn't take any of those Italians bar Mario at Arsenal.