While I agree a socialist north makes more sense I'm personally rather against HOI 4 solution. Not everything needs to be balkanized to death.
It's worse than that, it's stupid, and undermines a fundamental set up of the mod. The whole point of why the RSI exists is because it was erected on the ashes of the Kingdom of the Two Sicilies, which was split off from Italy in the aftermath of the First Weltkrieg and given back to the Hapsburgs as part of their rewards, but like Austria's other rewards, they were already so near the brink of death that they couldn't hold much of their "winnings" - hence, why Ukraine is with Mitteleuropa, even though it was originally an Austrian concession. That and while, yes, Sicily is more traditionalist and less industrial, Italian syndicalism, or rather rad-socism wasn't built on factory workers unions. It was always more agrarian based, and also slightly rubbing shoulders with the underworld of the Mafia in the same way the CSA rubs shoulders with organized crime - that's just sort of a connection unions and such have always had. Two Sicilies surviving while much of Italy isn't taken under the Papal wing in the chaos of the aftermath inverts the entire picture on it's head. The whole point was because the Two Sicilies was so inept and feckless, and unable to survive thanks to chaos in Austria, that it allowed a sort of rebellion to be co-opted by the French Syndicals, then still not portent of doom. Without this, it basically changes the game with regards to Austria, saying it was more powerful and able to hold together it's disparate empire. This is why it's a problem - it doesn't just invert KR lore for literally no reason other than wanting to look like "something" is being done, but it causes knock on effects elsewhere. Now, the
entire Austro-Hungarian situation has to be called into question. Not just Ukraine. Not just the Balkans. Not just Serbia.
Even the whole initial set up of A-H, namely the palpable tension in the run up to the 1937 Augsliech is now called into question. Because that whole power calculus has been called into question. I would beg DHKR devs not to import this, really. It's just stupid, like many of the changes HoI4KR does for no reason.
And that's before you consider the sheer stupidity of making
fucking Venice the core of Italian pan-nationalism. You might as well make them a Papal State puppet with that kind of logic. I don't mind the balkanization, honestly (as attested to how much fun I've had with the Italian War battlescenario), but the fundamental set up being proposed is stupid, and goes against fundamental KR lore for a long time for no reason, with nothing gained out of the process.