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In the final phases of the Second World War, the discredited king Victor Emmanuel III tried to raise the prestige of the monarchy by nominating his son and heir Umberto II "general lieutenant of the kingdom" and promising that after the end of the war the Italian people could choose its form of government through a referendum. A new constitution was written for the new republic, taking effect on January 1, 1948. The referendum at the origin of the Italian republic was, however, the object of deep discussion, mainly because of some contested results.

Albanian fear of renewed Greek designs on their country prevented effective co-operation with the Greek forces, and Mussolini's forces soon established a stable front in central Albania. Fearful that the Balkans might become the achilles heel of her domination of Europe, on April 6, 1941, Germany intervened (together with Bulgaria and Hungary) to crush both Greece and Yugoslavia, and a month later the Axis added Kosovo to Italian-ruled Albania. Thus Albanian nationalists ironically witnessed the realization of their dreams of uniting most of the Albanian-populated lands during the Axis occupation of their country.

Italy's dramatic self-renewal transformed the political landscape between 1992 and 1997. Scandal investigations touched thousands of politicians, administrators, and businessmen; the shift from a proportional to an Additional Member System (with the requirement to obtain a minimum of 4% of the national vote to obtain representation) also altered the political landscape.

While the Allied troops slowly pushed the German resistance to the north (Rome was liberated in June 1944, Milan in April 1945) the monarchic government finally declared war on Germany, and an anti-fascist popular resistance movement grew, harassing German forces before the Anglo-American forces drove them out in April 1945.

At the end of the 8th century the popes definitely aspired to independence, and found a way to achieve it by allying with the Carolingian dynasty of the Franks: the Carolingians needed someone who could give legitimacy to a coup against the powerless Merovingian kings, while the popes needed military protection against the Lombards. As a result, in 774 the Franks invaded and defeated the Lombards, and their leader Charlemagne was proclaimed legitimate king of the Franks by the pope. Later, in 800, Charlemagne was also crowned emperor of the Holy Roman empire by the pope; the new emperor (who was never recognized as such by the Byzantines) immediately conceded direct rule over central Italy to the pope, creating the Papal States.

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.

Unemployment has been steadily decreasing but remains high (8.6% in 2003, its lowest level since 1992). It is especially severe in the south where average unemployment exceeded 20% this year. Women and youth have significantly higher rates of unemployment than do men. A rigid labor market serves as a disincentive to job creation. There is a significant underground economy absorbing substantial numbers of people, but they work for low wages and without standard social benefits and protections.

The republican tradition in Italy had been started by Giuseppe Mazzini in the 19th century, but it immediately found a general consensus among the new political forces. The movement Giustizia e Libertą, that continued the traditional Mazzinian ideology, was the second important force during the resistance. It posed the question of the form of the state as a fundamental precondition to developing any further agreements with the other parties. Giustizia e Libertą joined the Comitato di Liberazione Nazionale (CLN). The various competing political factions agreed that a popular referendum would be held to determine the future choice of Head of State.

The Church (and especially the bishop of Rome, the pope) had played an important political role since the times of Constantine, who tried to include it in the imperial administration.