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If Italy surrenders does it do so at the end of the Allied turn (giving the Axis time to react) or at the end of the Axis turn (letting the Allies exploit the sudden disappearance of the Italian units)?

Sequence on Italian surrender.
Allies finish their turn; Axis starts their turn and finds morale at 19%.
Two faced, lying, duplicitous, treacherous Italians (you can see where this is going) move, build, fight, etc. normally, never giving a sign that anything could possibly be wrong.
Axis finishes turn and at that moment all the Italians disappear before the Germans have a chance to do anything leaving significant holes in the line where defection not foreseen.

This is the fruit of the loss of the Italian fleet and Africa.[:@]

Italy usually has to lose a few cities on the mainland first. So when the allies enter Italy, it is good to make sure you have 3 German units within 3 hexes of Rome...

Further consequence of Italian surrender:

Italy conquered Yugoslavia. All three partisan hexes plus Belgrade occupied by or next to a German unit.
When Italy surrendered, any hex not adjacent to an Axis unit became a 100% Allied hex; the city of Bihacs likewise even though there was an Axis garrison in hex 107, 50. Very surprising to say the least !!