ITALIAN ENTRY INTO THE WAR

1. The present policy of Italy is still one of non-belligerency,
as distinct from neutrality. In practice, the policy has meant
active assistance to Germany in the economic and diplomatic field,
with Mussolini retaining freedom of action to intervene militarily
at a favourable opportunity.

Under these conditions Germany has all the advantages of Italian
support without the liability which would be involved in actual
Italian belligerence.

2. Italy might become involved in war against the Allies as a
result of-
(a) A decision by Mussolini to come in on the side of Germany by
attacking Allied interests in the Mediterranean.

(b) Unilateral action by Italy against Yugoslavia.

(c) A decision by the Allies to force Italy's hand in insisting on
strict neutrality and in enforcing the economic blockade against
Germany so far as it affects Italy.

3. The main factors which can be regarded as affecting any
decision by Italy are-
For participation
(a) Mussolini is convinced that Hitler will win the war in a short
time, and that Italy has more to gain by a German than an Allied
victory.

(b) Gambling on the preoccupation of the Allies and their non-
interference, a favourable opportunity is presented for extension
of Italian territorial and economic interests in the Balkans.

Following on the seizure of Albania, the subjugation of Yugoslavia
by similar methods seems easy to accomplish.

(c) Italy has long standing claims against France over Tunis,
Corsica and East Africa, which have not been satisfied by peace
negotiation. The Italian ambition to conquer Egypt and so link up
her North and East African Territories to form a vast Italian
Empire has scarcely been concealed. An Allied defeat or peace
compromise may well achieve this objective.

(d) Entry of Italy will cause Allied diversion of forces from main
theatre, will close Mediterranean to Allied and friendly neutral
shipping, and facilitate overwhelming blow by Germany in Western
Europe.

Against participation
(a) Italy, more than any other country, is dependent on imports by
sea for vital industrial raw materials, especially iron, cotton
and oil.

The present war has aggravated her bad economic position.

The Allies will at least close all her exits from the
Mediterranean to the outer seas.

The United States will enforce the Neutrality Act against the
Mediterranean theatre of war, thus completely cutting off all
American supplies from Italy. It can be safely assumed that a war
lasting over six months would find Italy in a desperate plight.

(b) Effects of (a) on population would be cumulative and probably
decisive should the war be of long duration, as Vatican, Royal
Family and moderate elements are opposed to participation at the
outset.

(c) Italy would lose all the benefits of her present policy, and
the chance of the rehabilitation of her financial position. She is
not self-contained to the extent that Germany is, she has little
or no resources of raw material except six months oil supplies,
and she cannot rely on any substantial assistance from Germany
whose present needs would be the same as Italian deficiencies.

4. On the whole the balance seems well on the side of non-
participation. The risks of a long war are too great for direct
entry on the side of Germany.

A gamble on the seizure of Yugoslavia without Allied intervention
seems more likely, and this is felt to be the most likely danger
at the moment.

5. The question then arises as to what action the Allies will
take.

Following on the subjection of Finland, Norway, Poland and
Denmark, the blow to Allied prestige will be enormous. It is
likely that the whole of the Balkans, with the exception of
Turkey, would, even if not directly invaded, come under the
complete economic and military domination of Germany and Italy.

Can the Allies prevent this in any case?
From the military aspect, the answer appears to be a decided
negative, although naval pressure might in the long run be
decisive. No details are available as to the military strength of
the Allies in the Mediterranean area, but it is known that they
are scattered in Syria, Palestine, Suez Canal Zone, French and
British Somaliland, the Sudan, West Egypt and Algeria.

In the last war, fatal adventures were seen at Gallipoli, Salonica
and Mesopotamia, dependent on sea home supplies and sea
communications-all strong enough to [? constitute] dangerous
dispersions, and never at any time enough to compel a conclusion.

Then the Allies had complete command of the Mediterranean, with
Italy an Ally. Now, Italy controls the Aegean and Adriatic, the
only means of approach by which assistance to the Balkans could be
rendered. She has a powerful Air Force of some 3,000 first-line
aircraft and 120 submarines, and their operation from home bases
would rule out the possibility of any Allied military operations
in the Balkans until the Italian fleet could be destroyed.

In the meantime, Yugoslavia and other Balkan countries would be
overrun.

6. The following conclusions are therefore reached-
(a) Italian intervention might in the last resort prove an
effective contribution to the winning of the war by the Allies.

The immediate risks and disadvantages are so great, however, that
Italy should not deliberately be forced into war by the Allies.

(b) Should Italy alone attack Yugoslavia, we cannot render
effective assistance, and should accept the fait accompli.

(c) If Germany and Italy combine against Yugoslavia or another
Balkan country, or take action in common, prejudicial to Allied
interests, then it can be assumed that Italy would be regarded as
being automatically at war with the Allies.

(d) Mussolini may also decide to intervene directly by an attack
on the Allies.

(e) Action following on (c) and (d) would then be as visualised in
the appreciation by the United Kingdom Chiefs of Staff [1],
namely, naval and economic pressure, French air action against
Northern Italy, French military action against Libya, and
immediate action to restore imperial communications in the Red Sea
and Suez Canal Zone.

(f) The last mentioned is the one [of] main concern to Australia,
and the one in which the most effective assistance could be given.

For this reason, it seems desirable that the forces already
decided on to be sent abroad should be concentrated as rapidly as
possible in the region east of Suez, with a view to-
(i) defensive role so long as Italy retains her present non-
belligerent policy;

(ii) offensive role against Italian East Africa should Italy
intervene.