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If I remember correctly, Italy gave up each time its NM fell below 20%. Then depending on whether there are German units nearby Rome, it would surrender to Germany or an other country (if no units nearby).
But currently I have 2 PBEM games, where Italy hovers below 20% (even as low as 4%) for turns and still it fights on. Was it changed in one of patches? I remember that in many of my previous games Italians flipped once below 20%, that's probably a whole point of invading them actually, bc terrain there is brutal for attackers.

P.S. One more question - if Allies land on Sicily, Italy gets NM penalty. But is it one-time loss, ot their NM is decreased constantly while Allies are there?

Good questions. Italy buckles easily, maybe my expectations high. You cannot gain morale by retaking vital location either (think that was answered).

Looks like there might be an issue with one of the scripts here which we'll be looking into to correct for the next build.

ORIGINAL: Marcinos1985

P.S. One more question - if Allies land on Sicily, Italy gets NM penalty. But is it one-time loss, ot their NM is decreased constantly while Allies are there?

The script triggers a significant one time loss, though for every turn that a resource belonging to an enemy Major is occupied there is a small drop in its NM too.

With the Cookie Cutter strategy of attacking Italy and suicide transports to Italy. Might as well leave Rommel there and Luftwaffe. Because that's where everyone goes.

I've lost 80% of my Axis games because of Italian buckle