Off the cuff, I'd say that the sinking of the Lucy hurt the Geman cause. It was intentional in that the U-Boat skipper definitely knew it was a passenger liner he was sinking. However, in Massie's book Castles of Steel, you definitely get a sense that there was a tension between the German high command and the Navy on the use of U-boats, with the navy wanting to use them more aggressively. I think this attack was a result of that tension.