If Italy did not join World War 2, we need to explore two situations, namely:
- Italy's impact on the war itself, and
- Italy as a neutral country after 1945.
In a nutshell, Italy’s absence in the war would not be significant to the overall course of World War 2. Italy would probably be similar to Spain under Franco rule after the war as a neutral country, however, still under the reign of Benito Mussolini.
How will Italy’s absence affect the outcome of World War 2?
General military operations in Europe with Italy as a non-belligerent
The general ridicule of Italy’s military performance in the campaigns in World War 2 would not happen given that these disastrous military escapades would not take place.
In truth, Italy’s military was never up to the level that would be significant in the conduct of modern war that WW2 dictates.
Its equipment is wholly inadequate and while the individual Italian soldier has shown valor and gallantry, the generals in Italian military high command still conduct its operations ala World War 1 doctrine, focusing on its infantry rather than to consider the combined arms approach adopted by the Germans and subsequently by the Allied Powers.
In addition to these losses the deaths of African soldiers conscripted by Italy, total military dead, or missing from service reported by Italy was 291,376 in 1940–1945 (en.wikipedia.org).
We would need to assume that Italy’s neutrality would mean that Libya would be a neutral buffer zone between French North Africa and British Egypt and the North African campaign by the Allies would probably not take place.
Even if it did, it would not be the same scale but as a staging area for the push to southern Europe. The inconsequential campaigns against Greece and Yugoslavia would not take place and previous German resources would not be diverted to salvage the war situation.
Opinions differ on the question that if Germany has launch Operation Barbarossa in its original intended date in April 1941 instead of June 22, 1941, it would have given them ample time to take Moscow before the onset of the Russian winter.
In my opinion, the 2 extra months may give Germans time to occupy Moscow, but they would probably have to evacuate and retreat in the face of the winter Russian offensive which would have threatened to surround the German forces in Moscow in a Stalingrad-like situation.
The Allies would probably occupy French North Africa with a modified version of Operation Torch and prepare to push into Europe in 1943 rather than 1944 which a key tenet that the Americans can muster enough resources to make two simultaneous landings in Normandy and south of France (Operation Dragoon).
The route to Germany would take from France to Germany rather than the underbelly of Germany via Italy given its neutrality sparing Italy from the destruction and population upheaval witness in other belligerents in WW2.
Allied plans lay a carpet of paratroopers across southern France during Operation Dragoon
Curbing Il Duce hungry for conquest parity
This alternative history would have to make a big assumption that Mussolini did not follow Hitler’s footsteps in the land grab in Europe. It is an especially big assumption given that Mussolini was the first Fascist leader in Europe in 1922 with Hitler was an adoring pupil.
The decision for the Italian failed military campaign was mainly due to Mussolini's fatal attempts to emulate and even tried to match Hitler’s achievements in the early years in WW2.
After the Polish, Scandinavian conquests, and the subsequent fall of France and the retreat of the British via Dunkirk in 1940, Mussolini thought that Italy would be able to enjoy the spoils of war with Hitler and his dream of building Italy to become the next Roman Empire.
This narrative would assume that Il Duce has had a longer length of patience with foresight and not join into the fray of war in 1940 but delayed until late 1942 when the tide turns. Given the proximity of Italy sharing its border just south of Germany, Mussolini would probably keep a neutral stance like Switzerland until 1945.
There were a few alternative scenarios of how Italy would become after 1945, namely:
Most likely scenario – Mussolini survives and leads a modern Italy due to Cold War Politics
Mussolini’s autocratic Fascist rule from 1922 has often overlooked its positive impact on Italy.
Mussolini brought Italy into the modern era and had eradicated massive poverty and unemployment through his public works initiatives. Italians of old often cited that they have had ‘good roads’ under Mussolini.
His Minister of Finance, de Stefani, provided much desired economic stimulus via tax code changes and trade liberalization. The financial cost of the war to Italy was between 6 and 8.5 billion lire, approximately 14 to 20 percent of the country's annual expenditure.
In the early years of Mussolini’s reign, Fascism was welcomed by the Italians as the solution to remove the years of constant parliamentary stalemate and inaction and to give power to Mussolini so that he could deliver a five to ten-year plan for the country without opposition.
The Iron Curtain was described by Winston Churchill on 5 March 1946. Source: WikiCommons
With the onset of the Cold War from 1945, there would be a race between the West and the Soviets to exert influence on Italy.
While the Allies have given Franco’s Spain the cold shoulder for his support of Nazi Germany after 1945 with economic sanctions and exclusion to UN and NATO memberships, Italy would probably be welcomed to the fold of the UN and NATO given its strategic location at the fringes of the Iron Curtain, the boundary separating western Europe from the Soviet sphere of influence in eastern Europe.
NATO needed Italy for its forward military bases and to prevent further Soviet excursions to the Mediterranean Sea, threatening trade between western Europe and the Middle East and Asia via the Suez Canal. This pragmatic forgive-and-forget attitude by the US was evident with its approach to West Germany and a greater extent, Japan in the Far East against the Soviets and the Chinese.
Next likely scenario – Mussolini is ousted, and Italy turns to Communism in the late 1940s, early 1950.
The Italian communist party has always been active since the days after WW1. Mussolini’s Fascist rule have had curbed their accession in the Italian political scene by outlawing it. Stalin might be tempted to test the West resolve like what he had tried to do in 1946 in Belin.
The Communist Party of Italy (PCI) may have reorganized and attempt to participate in parliamentary elections with pressure from the USSR to legitimize the PCI. However, the PCI faces two big hurdles in its aspirations, namely: the Vatican and the Spanish Monarchy.
Both the Vatican and the monarchy have been greatly supported during Mussolini’s reign and the prospect to communists promoted atheism and abolishment of the monarchy and their subsequent summary execution ala the Tsar of Russia would probably drive them to the anti-communist camp.
Hence the only option available for such a scenario would be a coup d’état orchestrated by some disgruntled Italian military fraction supported by the KGB with the USSR threatening to support the coup plotters with an intervention. The outcome would have been dependent on the reaction of the general Italian populace to the coup.
In summary, in all likelihood, Mussolini would have prevailed and become one of the strong men in post-war Europe. Italy, as a country, would not have been war-ravaged and its military would have come of age after 1945.