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Most raw materials needed by industry and more than 75% of energy requirements are imported. Over the past decade, Italy has pursued a tight fiscal policy in order to meet the requirements of the Economic and Monetary Union and has benefited from lower interest and inflation rates. Italy joined the Euro from its conception in 1999.

At the beginning of World War II Italy remained neutral (with the consent of Hitler), but it declared war on France and Britain on June 10, 1940, when the French defeat was apparent. Mussolini believed that Britain would beg for peace, and wanted "some casualties in order to get a seat at the peace table", but that proved a huge miscalculation. With the exception of the navy, the Italian armed forces were a major disappointment for Mussolini and Hitler, and German help was constantly needed in Greece and North Africa.

At the beginning of the 16th century Italy started to suffer the effects of an economic crisis due to the move of the main trade routes from the Mediterranean to the Atlantic. Most of the small and weak Italian states were defeated by foreign powers (mainly Spain); some of them (e.g. Milan and Naples) were annexed, others (e.g. Venice and Florence) were reduced to a lesser role. The papacy lost much of its importance both because of military defeats and of Protestant Reformation, which deeply weakened the catholic church.

Under longstanding bilateral agreements flowing from NATO membership, Italy hosts important U.S. military forces at Vicenza and Livorno (army); Aviano (air force); and Sigonella, Naples, and Gaeta – home port for the U.S. Navy Sixth Fleet. The United States has about 16,000 military personnel stationed in Italy. Italy hosts the NATO War College in Rome.

The Italian economy has changed dramatically since the end of World War II. From an agriculturally based economy, it has developed into an industrial state ranked as the world's fifth-largest industrial economy. Italy belongs to the Group of Eight (G-8) industrialized nations; it is a member of the European Union and the OECD.

The birth of the Italian republic (officially on June 2, 1946) is a key event of Italian contemporary history. It is controversial because of suspicions of fraud that were advanced by monarchists). Until 1946, Italy was a monarchy ruled by the House of Savoy (kings of Italy and, previously, of Sardinia). In 1946, after the results of a popular referendum, it became a republic. A Constituent assembly was elected at the same time to prepare a new constitution for the Republic. This article is about the Referendum on the form of State.

There have been frequent government turnovers since 1945. The dominance of the Christian Democratic (Democrazia Cristiana) party during much of the postwar period lent continuity and comparative stability to Italy's political situation.

As Germany annexed Austria and moved against Czechoslovakia, Italy saw itself becoming a second-rate member of the Axis. The imminent birth of an Albanian royal child meanwhile threatened to give Zog a lasting dynasty. After Hitler invaded Czechoslovakia (March 15, 1939) without notifying Mussolini in advance, the Italian dictator decided to proceed with his own annexation of Albania. Italy's King Victor Emmanuel III criticized the plan to take Albania as an unnecessary risk.

With more than 39,8 million tourists a year Italy is the fourth most visited country in the world, behind France (77), Spain (51,7) and United States (41,9). There are famous places like Venice, Florence, Siena, Milan, Naples or Rome, each with a rich cultural heritage from the Roman Empire. Famous objects are the ruins of Pompei, the Capitole, vineyards in Tuscany, Sicily with Mt. Etna, the coastline of the Adriatic Sea or the Alps.

Islam was almost entirely absent in Italy from the time of that country's unification in 1861 until the 1970s, when the first trickle of North African immigrants began arriving. These North Africans, mostly of Berber or Arab origin, came mainly from heavily Islamic Morocco, though they have been followed in more recent years by Tunisians, Albanians and to a lesser extent, Libyans, Egyptians, Pakistanis, Middle Eastern Arabs and Kurds. Some estimate the number of Italian converts to be around 10,000.

The musical influence of Italian composers Palestrina, Monteverdi, Corelli and Vivaldi proved epochal; in the 19th century, Italian romantic opera flourished under composers Gioacchino Rossini, Giuseppe Verdi, and Giacomo Puccini. Contemporary Italian artists, writers, filmmakers, architects, composers, and designers continue to contribute significantly to Western culture.