The four elements of the trauma suffered by Holocaust survivors are powerlessness, annihilation anxiety, object loss and torture. A central and persistent component of the so-called survivor syndrome is survivor guilt. Classical theories of guilt do not explain it satisfactorily. Psychoanalysis or psychodynamic therapy for survivors is one of the most difficult challenges due to the powerful countertransferences that the therapists must struggle with. The essential psychic process underlying survivor guilt is self blame which is a defensive omnipotent phantasy. Powerlessness and annihilation threat resurrect unconscious memories of neonatal helplessness, dependency, vulnerability and primal agony, generating the need for defensive omnipotence. In the traumatic environment created by the Nazis, self blame was virtually the inevitable psychic defence. It has persisted because mourning is obstructed by the conscious and unconscious fear of being overwhelmed by the re-emergence of the originating feelings of powerlessness, annihilation anxiety and pain of object loss. Adaptive and maladaptive defences are used throughout later life which attempt to avoid powerlessness and loss. Healing can still take place through creative reparation and memorialization which may facilitate successful mourning.