It was a match too far for Stuart Pearce's brave young lions who had battled so hard to reach the final in Malmo.

With goalkeeper Joe Hart suspended along with strikers Gabriel Agbonlahor and Fraizer Campbell, England were always second best.

Gonzalo Castro, who netted against England in the group stages, opened the scoring at Swedbank Stadion with a confident finish midway through the first half.

Mesut Ozil was the architect of the 23rd-minute opener, receiving the ball from German midfielder Fabian Johnson before running at the England defence and playing a through-ball between Martin Cranie and deputy keeper Scott Loach.

It was perfectly weighted for Castro, who stabbed the ball over the Watford keeper and into the net.

Three minutes after the re-start, Germany grabbed their second. Michael Mancienne, on at the break for Nedum Onuoha, fouled Sandro Wagner 35 yards from goal and Ozil took charge of the set-piece.

The Werder Bremen playmaker was helped by England's wall falling apart and Loach could not handle the swerving effort, falling too far to his right before getting a palm on the ball and helping it in.

Lee Cattermole tried his best to reduce the arrears, skimming the bar from long distance when he was given time on the ball.

As England gambled on all-out attack, they were hit on the break by two clinical goals from Sandro Wagner.

Both came from swift breaks down the left. the first saw him cut in and drill low through the legs of Loach on 79 minutes.

And five minutes later, he rounded off the victory with a superb curling effort which crept just inside the far right post.

Afterwards, it was announced that coach Stuart Pearce had signed a new two-year contract to remain in charge of the England Under-21 side.