Why did Markus Zusak choose Germany in World War II as the setting for The Book Thief?

There are several reasons why Markus Zusak might have chosen World War II–era Germany as the setting for The Book Thief. For one, Germany acted as the center of crisis in World War II, even as it radiated out massively and took over the states around it. Hitler and the Nazi Regime headquartered in Germany, and Germany is the site where Nazi antisemitism grew and horrifying misinformation about Jews was allowed to take root.
Since the novel is historical fiction, this is one way to look at it: the choice in setting—in tandem with Death and Liesel (presumably non-Jews) being the main points of view—focuses on the everyday German much more than texts like The Boy in the Striped Pajamas. This choice explores the role that common people had in the Holocaust.
When trying to answer questions like this about a text, it helps me to think about what would be different if the author had chosen to go in another direction. If The Book Thief were set in Poland, focus may be shifted away from everyday life of Gentiles in Nazi Germany. Everyday Poles dealt with invading German forces rather than forces from within. That scenario has a very different flavor than focusing on the source of the Holocaust and the people who had the most power to either enable antisemitism (by joining Nazi forces because it was easier than standing up to them) or resist it (like when Rosa and Hans hide Max). Likewise, if the book were set in America during World War II, the characters would be at a significant geographical and emotional remove from the scene of the crisis, and would likely not have the same information that Liesel has.
So, it seems that something about the cultural and political setting in Germany specifically was important to Zusak. The Book Thief is centered around Liesel seeing tragedy and hatred targeted at people she loves—Max and, although we don't see it directly, her father—by her own community. However, the book is equally centered around Liesel seeing her foster parents resist German Nazism, injustice, and authoritarianism to their deaths. Liesel and Max both survive because of the choices Rosa and Hans make to protect people who are persecuted and to protect access to truth and knowledge. Notably, Liesel herself survives because she has reason to be in the basement in the first place: she is reading stolen books that Hans had let her rescue from the burnings and helped her learn how to read with. Death says at this time,

As always, one of her books was next to her.

Here's another quote by Death that I think sums it up:

I wanted to explain that I am constantly overestimating and underestimating the human race—that rarely do I even simply estimate it. I wanted to ask her how the same thing could be so ugly and so glorious, and its words and stories so damning and brilliant. . . .
I am haunted by humans.

Here, Death speaks to the power of words to both build beautiful things and destroy them. So much of what the Nazi regime used to control people and to kill millions of Jews—and LGBTQ people, disabled people, people of color, and Romas—was the suppression of information and the subsequent substitution of misinformation. The Book Thief catalogues book burnings, manipulation of impressionable children into the Nazi Youth, and groupthink. Liesel resists Nazi Germany with exactly the same things that they tried to use against her: words. She reads banned books that equip her with critical thinking skills, speaks to those around her about her doubts, and listens deeply. By placing his protagonist at the center of the Nazi regime, Zusak is able to discuss the power of resistance and the detrimental nature of passivity in a climate where people are actively manipulating others with misinformation and suppression of critical thought.
It's also interesting to consider that, in Judaism, words are highly valued because the world is created by speech rather than any use of physical force. Genesis reads, "And God spoke . . ." as the first thing G-d does. Zusak may be alluding to this tradition with the way Death talks about the power of words as the power of humanity.
https://encyclopedia.ushmm.org/content/en/article/indoctrinating-youth