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From 1861 until 1922, Italy was a constitutional monarchy with a parliament, mostly elected with restricted suffrage (in 1913, the first universal male suffrage election was held). The so called Statuto Albertino, which Carlo Alberto conceded in 1848 remained unchanged, even if the kings usually abstained from abusing their extremely large powers (for example, senators were not elected but chosen by the king). The new state faced immense problems, both because of the widespread poverty and illiteracy (especially in the south), and the deep cultural differences (for example, there existed no common language) between the various parts of Italy: there were even peasant insurrections asking for the return of former rulers.

Italy has few natural resources. With much of the land unsuited for farming, it is a net food importer. There are no substantial deposits of iron, coal, or oil. Proven natural gas reserves, mainly in the Po Valley and offshore Adriatic, have grown in recent years and constitute the country's most important mineral resource. Most raw materials needed for manufacturing and more than 80% of the country's energy sources are imported. Italy's economic strength is in the processing and the manufacturing of goods, primarily in small and medium-sized family-owned firms. Its major industries are precision machinery, motor vehicles, chemicals, pharmaceuticals, electric goods, and fashion and clothing.

crisis arose in Italian society as a result of the First World War, social inequalities, and the consequent tension between Marxist and left-wing parties on one side and conservative liberals on the other. This crisis led to the advent of Fascism, which destroyed freedoms and civil rights, and establishing a dictatorship. Fascism broke the continuity of the parliamentary tradition. The support of ruling elite and especially Italian monarchy was crucial for the seizure of power by Benito Mussolini. After the March on Rome, the King Vittorio Emmanuele III refused to sign a decree to declare a state of siege, and asked Mussolini to form a new government. This King's decisions were taken in accordance with the Statuto, but in contrast with the parliamentary practice of Italian liberal state.

Italy has been a democratic republic since June 2, 1946, when the monarchy was abolished by popular referendum. The constitution was romulgated on January 1, 1948. The Italian State has a central state authority (the Government), 20 regions and about a hundred provinces. The prefect of each of the provinces is appointed by and responding to the central government, which he locally represents.

Europe's Renaissance period began in Italy during the 14th and 15th centuries. Literary achievements, such as the poetry of Dante, Petrarch, Tasso, and Ariosto and the prose of Boccaccio, Machiavelli, and Castiglione exerted a tremendous and lasting influence on the subsequent development of Western culture, as did the painting, sculpture, and architecture contributed by giants such as Filippo Brunelleschi, Leonardo da Vinci, Raffaello, Botticelli, Fra Angelico, and Michelangelo. Modern artists include the sculptor Tommaso Geraci.

Significant changes are occurring in the composition of this trade. More value-added products such as office machinery and aircraft are becoming the principal U.S. exports to Italy. The change reveals the growing sophistication of the Italian market, and bilateral trade should expand further. In 2000 the United States imported about $24.5 billion in Italian goods while exporting about $12.4 billion in U.S. goods to Italy. U.S. foreign direct investment in Italy at the end of 1999 exceeded $14.1 billion.

As a country, Italy offers many different faces, both culturally and geographically. The far north has many German speaking areas, popular destinations for skiing in the winter and walking during spring and summer. The Italian Lakes attract large numbers of visitors yearly, Tuscany (Toscana) and Umbria have been popular destinations for centuries, as has the Amalfi coast.

Italy's economic performance has at times lagged behind that of its EU partners, and the current government has enacted numerous short-term reforms aimed at improving competitiveness and long-term growth. It has moved slowly, however, on implementing certain structural reforms favored by economists, such as lightening the high tax burden and overhauling Italy's rigid labour market and expensive pension system, because of the current economic slowdown and opposition from labour unions.

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.