In Code Geass R2 episode 17, why did Lelouch lie to Suzaku that he ordered Euphemia to massacre all the Japanese people? The scene starts at 8:14 into the episode.
It's because he did order Euphie to massacre the Japanese people.
In Stage 22 - Bloodstained Euphie after Euphie had invited Zero to attend the commemoration ceremony for the Special Administrated Zone, Lelouch had planned to use his Geass on Euphie to shoot him. It would have looked like Britannia had declared the zone to lure out Zero to be assassinated and spur the people to fight Britannia. In the chaos Zero would, however rise from the dead (as the shot wouldn't have been fatal) and help lead the Black Rebellion. It is for this reason he created a ceramic and bamboo hand gun and snuck it in with him.
Of course Euphie was Lelouch's first love and Euphie explains that she is most likely going to be condemned by the Royal Family for her independent action and that she wanted to create the Zone so that she could be with Lelouch and Nunnally (as in the stage before she confirmed Nunnally was living in Japan with Lelouch). Hearing this, Lelouch is unable to go though with his plan because his first love had totally defeated him.
Here, Euphie remarks that she could never shoot Lelouch. That's when he reveals the nature of his Geass (without actually revealing it.)
Lelouch: However... and in your usual rash Euphie fashion, you've managed to end up winning all of it. When I think of you, I don't visualize the sub-viceroy or a princess; I only see the plain little Euphie who you used to be.
Euphie: Then will you join plain little Euphie and help her?
Lelouch: You are... you are the worst opponent I have ever faced. You win.
Lelouch: I'll amend my plans to help out your Special Zone. But not as your subordinate, all right?
Euphie: All right! Though you haven't got very much faith in me, have you?
Euphie: Did you honestly believe that by simply threatening me I would shoot you?
Lelouch: Oh, no, you've got it all wrong. When I really want people to follow my orders, they will not resist me -- whether it's to shoot me, to grant pardon to Suzaku, or any order at all.
Euphie: Oh, now you're being silly. Stop playing with me.
Lelouch: *Geass Activates* I'm serious. For example, if told you to kill all the Japanese, it wouldn't matter how you felt about it.
Euphie: No... don't make me do it, please! I'm not-- I'm not going to do it, please...! I don't wanna kill them! No...
Lelouch: Did I--?!
Euphie: You're right. I have to kill all the Japanese.
Lelouch: I've become like Mao! -- I can't control my Geass power! Forget the order I just gave you! Euphie! Wait, Euphie, don't!
So while he didn't mean for it to happen, Lelouch's Geass went out of control, just like Mao's did. So now if he looks at anyone and asks/tells them to do anything, they'll always do it. Later in the next episode as the Black Rebellion is starting, Lelouch laments that he will never be able to see anyone again with the exception to C.C. who is immune1
By the time Suzaku confronts him, he was suffering from the guilt of having been responsible for killing Euphie and Shirley. He had already destroyed Shirley when he inadvertently killed her father in the landslide and in her grieving state she became mentally unstable. She planned to kill Lelouch (as a part of Mao's plan) and then herself because she wouldn't be able to live with the guilt of having killed the boy she loved. To save her, Lelouch "killed" her by erasing his existence from her memory.
when Jeremiah Gottwald used the Geass canceller, she was caught in the blast. Her memories returned but the memories she gained in the past 2 years were gone. Still grieving her father and confused that all her friends were gone (Rivalz was the only one left at school as Milly, Nina and Kallen had already left for different reason) and Nunally was now the Viceroy of Area 11, she tried to seek out Lelouch because of her last memory of him saying she would forget. She confronts a boy claiming to be Lelouch's younger sibling who then kills her. Rolo admits he did it but it was to protect Lelouch's identity as Zero. Lelouch knows this is a lie but he blames himself because it was his actions which made Shirley unstable which, to him, was the major contributing cause of her death.
By Turn 17 - The Taste of Humiliation, Lelouch had already accepted these and while he may have been able to handle it, Suzaku then re-opens and pours salt on the wounds
Suzaku: You wanna know? I'm fed up with lying. I've had to lie to Nunnally. Just the way you have. That's the worst thing. Some friend you were. You've been betraying me all along. Not just me, either, but everyone on the student council, too. And even Nunnally. And don't forget Euphie!
Suzaku: I need to know. Did you use your Geass power on Euphie? Be honest.
Suzaku: You caused her to massacre the Japanese?
Lelouch: I ordered her to do it.
Suzaku: Why would you use your Geass like that? Answer me!
Lelouch: To motivate the Japanese people. If the specially administrated zone of Japan had been established, the Black Knights would've collapsed.2
Suzaku: And Shirley's death?
Lelouch: Also my fault.
Suzaku: You aren't even a human. You know that? Shirley and Euphie were both of them nothing more than pawns for your ambitions?
Lelouch: Yes, that's right. So all the sin is mine alone to shoulder. My little sister had nothing to do with it.
Suzaku: Why, you coward! How could you use Nunnally like that?
Lelouch: Suzaku, I'm sorry.
Lelouch had already been a good liar: he hide his family background and who knows how many people in the past could have identified him and Nunnally as royalty, he's lied to Nunnally about his night activities, he hid from Shirley about him being Zero, he had lied to the Black Knights about who he was, and he had planned to lie to the entire country in his original plan for the Special Administrated Zone. What's a couple more lies now? Especially when he believes it's his actions which caused their deaths.
1: There is the exception to those who Lelouch has used his Geass on before like Shirley but numbering those who Lelouch would have met if he had a normal life to everyone else he would meet these are few in number. Also with Nunnally, while Lelouch couldn't make eye contact with her due to her blindness, aside from what we learn at the end of the series it was initially said that her blindness was trauma from seeing her mother die, so that aspect is based more on psychological factors that actual damage to the eyes. Nunally would one day open her eyes and then she's be susceptible to Lelouch's Geass
2: This is actually true, had the zone been established then the Black Knight who are mainly Japanese would choose this option over getting killed. Though after being convinced by Euphie, Lelouch was going to amend his plans for the Black Knights, and this could mean allowing them to disband or having them supplement a S.A.Z Military Force
That's a really good question to ask, to be honest I didn't know at first but I thought about it for a while and came up with a few ideas why.
My first guess is Lelouch didn't mean to use the Geass on Euphie (which we all know) but he was probably scared to tell Suzaku, his best friend, that he had lost control of the Geass since it was to powerful for him to tame. Plus, since he had used the same power to control many other people including Suzaku, he might have thought telling him he lost control of the Geass would make him no longer want to trust Lelouch.
My second idea is he was probably disappointed to tell Suzaku that he had lost control of his own power by accidentally using it on his little sister Euphie to kill all the Japanese.
My last and final guess is that he was afraid of his best friend, Suzaku, finding out that he had lost control of the Geass and accidentally used it on his little sister, and that he would consider him as nothing but a selfish brother. Also knowing he did not have control, Lelouch knew telling Suzaku would make him a danger to the people and to his friends. Lelouch most likely knew this and that is why I think Lelouch didn't tell Suzaku the truth about him losing control of his Geass just as Mao did.
Lelouch isn't the bad guy, but as we have seen throughout the series, he finds it easier to work in the shadows. I think that if he told Suzaku that Euphie's death was an accident then Suzaku would have fallen into a depression believing that there could have been ways to stop it rather than just defeating Lelouch. I even think Kallen mentions this at the very end of the series and it's something along the lines of "it's easier to blame a person rather than circumstance".
After watching Code Geass: Lelouch of the Rebellion and Code Geass:Lelouch of the Rebellion R2, I simply couldn't understand why Lelouch allowed himself to be overthrown by the Black Knights, and even lied about what his intent was. Or why he lied to Suzaku about ordering Euphie to kill the Japanese. So I spent hours trying to come up with a theory, and I ended up with this.
I think that Lelouch had planned for Suzaku to kill him all along. If he had admitted that he didn't mean to make Euphie kill the Japanese, Suzaku would be unable to kill Lelouch. In order for the Zero Requiem to succeed, Lelouch had to die. And Lelouch trusted nobody more than Suzaku, even when they were enemies. After all, he frequently said that there was nothing they couldn't do together.
Many people have wondered if Lelouch really did use the Black Knights. I believe this is partly true and partly false. When he was confronted by the Black Knights after they heard the recorded conversation between Lelouch and Suzaku, he told them that everything he had done was for his entertainment, and that the Black Knights were just pawns to him. I think he did this to protect the Black Knights-if they believed they were worthless to him they would have no reason to rescue him now that Schneizel knew his identity. This would protect the Black Knights. This implies that he cared for them and did not use them. However, the Black Knights were essential to his plan, as he was relying on them to create a better world once he died. So he couldn't afford for them to collapse and be defeated. This could be seen as using them.
So I guess Lelouch is evil, but he is fighting on the side of justice-he is willing to sacrifice his humanity for the greater good. And an evil hero is still a hero. And as Suzaku realised at last, it's the end result that matters, not the means of getting there.
I hope you consider and expand my theory, and I hope this answers the question.