Imagine, we must - for we can never know for sure whether such a world would indeed have been worse. They were, after all, very organized. Before the occupation, the main avenue in Copenhagen (a pair of two way streets) was chronically congested. The Germans changed it into a pair of one-way streets, doubling throughput. The change persists to this day. And as for the Holocaust - well, virtually all the Jews in German occupied territories were killed as it was. It's not clear that a German victory, whatever that means, would have resulted in many more deaths. And maybe a unified Europe, under whatever flag, might have resulted in some interesting benefits.
I'm not suggesting it would actually have been a good thing - I find the idea rather sickening. I'm just saying that any historical counterfactual is arguable, no matter how obvious it seems at first. I think it better to point at actual instances of colonialism gone wrong - indeed WW2 still qualifies, and it's not necessary for the Germans to have won to make that argument.