The first possible response to Italy's early DOW is to do nothing. As Forwarn mentions, Southern France remains frozen and is thus under-garrisoned and vulnerable to immediate overrun (esp if paratroops are used). This option is not particularly a pleasant one because it knocks France out of the war in September 1939 and provides Germany with W and E France (undamaged!) This (as is Schury's point) is a massive blow to the Allied cause and leaves Germany in a position to have a huge production jump. Furthermore, when Yugo is liquidated (with ease), Hungary, Rumania and Bulgaria come online as full Axis!!!! In Fall 1939!
The second possible response is to reinforce Southern France. The only way to do this is to DOW Italy (Albania). UGH. This provides Italy with Insta-militia (joy) in return for the loss of Albania. Not a good trade. Furthermore, the US WR drops by 10 leaving it nicely in the negatives. That said, this does make it possible to reinforce S France somewhat - certainly enough to repel an attack in Fall 1939. Too, the French fleet in Southern France is able to leave port for use (target practice) in the central med.
When I initially was questioning the efficacy of Schury's strategy, I was making two erroneous assumptions. The first was that one could provision Southern France. The second was that if Southern France were to fall, the Southern French Navy and other French Navy at sea would not disappear as occurs with the establishment of Vichy. Unfortunately, this is not the case. If Southern France falls, Vichy is not created and the North African territories remain WA (I forgot to look at French Indo China). BUT, the fleet disappears. So, even when reinforcing S France (via Italian DOW) a turn or to (at best) is bought in exchange for a bad WA WR and a few overseas territories. Of course, the Axis gets extra production, extra units and quick access to the Balkans.... Not really a good deal, but perhaps better than option one. (Not sure)
I did what I could to reinforce S France, but this comes at a cost to reinforcing other territories..... I chose to not reinfoce Yugo, given the large German force that would be able to neutralize what I had before I could threaten Rumania next turn.... Limited troops and transport also had something to do with this decision as well as the fact that they would be more subject to isolation. That said, it might have been a more viable strategy to reinforce Yugo vigorously and provide S France with the minimum necessary to withstand attack. Choices. Since I have never been confronted with this one before, I may have chosen incorrectly.....
I personally would recommend changes to Yugo's volatility (0) to eliminate the possibility of the exploit altogether, but discussion is ongoing....
Anyhow, conceding that the strat is an uber-exploit, herewith a screenshot of my turn:
