I remember, that in the UK people after the fall of France went down the street ... to ask for an end to the war: Poland no longer existed, France was KO. The war was "lost". Churchill was "thanked" after the war with a good kick in the butt. Many British historians say "yes hitler would have dominated Europe, but the UK would probably have maintained the empire (perhaps even kept its grace thanks to the German help, hitler wanted in his dreams, that the UK was a" sister nation "of Germany , with the UK ruler of the seas and land Germany) more or less intact (except for some concessions to the axis). Regarding Italy, this happened because Mussolini, at the beginning of the war had promised "a few hundred deaths and a short war ". The war instead:
-wrought thousands of deaths.
- it was long and hard.
-It was lost!
If the UK had also lost Malta, Gibraltar, Cairo / Egypt. I doubt the Indian soldiers would have continued to fight for a "defeated" nation and therefore problems in india (so either send the soldiers against the Indians or send them against axis power) that almost certainly would have rebelled. I don't know the relationship with the other dominions (which had a more or less autonomous government). I know that strategically "is nothing" but psychologically losing Malta, Gibraltar and Egypt ... is a serious blow. I am surprised that in the forum you underestimate the psychological factor, when in reality it is very important.
While opinions were still in flux, I wouldn’t say the British population was marching through the streets demanding an end to the war in 1940. If anything it was government factions that were the bigger defeatists/proponents of peace.
Churchill’s defeat in 45 was due to a number of factors, none of which included his victory in the war. Attlee has been a member of the war cabinet, Labour offered massive new spending, Churchill still had some baggage from the government’s failure to build “a country fit for heroes” as promised after WWI, and fatigue with the Conservative party after a 10 year Parliament as well as parts of the party still being tainted with appeasement. And Churchill was not only refused resignation from party leadership, but was able to leverage his immense political popularity into a major comeback over the next two elections.
While the war was going badly, it wasn’t completely lost when the Italian government collapsed. Much like the French government they could have fought on if they had so desired for some time.
Anyways, I again reject your assertion that democracies are so much more inherently inclined to giving up in such total wars. Even if some voters have doubts, elections often aren’t held in the thick of conflict anyways. Democracies were often more reluctant to get into wars to begin with and in the timeframe after that which HOI IV depicts could be worn down over many years in more limited conflicts where there was little press censorship and not total commitment to the war (see colonial independence wars and Vietnam for instance), but these have little bearing on WWII.
As to your points about if Italy captured the Med, we’ve already discussed this in two or three threads and at some risk of digressing off topic, but the war would hardly be lost for Britain, the Indian Army isn’t going to mass mutiny without a lot more happening (and localized revolts could be quickly dealt with through force or promises of autonomy post-war), and the dominions aren’t going to be leaving the war while the UK is still in it. As for psychological blow, sure it’ll hurt, but far less (from a military and morale perspective) than the fall of France.
