This game was arranged by me via noneutrality. I was testing games which involved the majors fighting all their minor neighbors/rivals at once (like Germany vs Poland, Czechoslovakia, Austria, Low Countries, and Denmark, Soviets vs. Poland, Romania, Finland, Turkey, Baltics, and Persia, etc). Italy was the only one to lose so miserably.
The Greeks managed to amphibiously invade Libya, under AI management no less. That is utterly ridiculous.
To be further noted, in the Greco-Italian campaign, the Italians had only eight divisions stationed in Albania against fifteen Greek divisions, and of these only three were sent on the initial offensive. Badoglio projected that 20 divisions would be needed for a successful offensive, but was overruled by Mussolini and given only 12 days' notice before the attack would begin.
The failure was entirely a strategic/logistical one based on totally inadequate planning. A well-led Italy could have achieved much more than it did historically. In-game Italy should not be made a superpower on par with Germany, but it should be capable of exceeding the performance of its historical counterpart, which was far worse than it should have been. Thus, Italy should be capable of succeeding at various endeavors (invading Greece, fighting in North Africa, contesting the Mediterranean, taking southeastern France, invading Malta, etc) in which it failed historically. It shouldn't win all the time or even most of the time, but it should be balanced to have a chance at any of these.