On top of that, the average and casual Italian at this point had a very low morale, since they by now knew that Italy would loose, even if the Axis won the war.
That statement rings false. Germany did not have plans to enslave Italy after the war. In his writings, Hitler pointed out that if a nation wants allies, it must establish a reputation for treating its allies well. It was a logical conclusion for the leader of any nation, and I have seen no evidence to suggest Hitler had deviated from that logic.
I agree Italian morale was low. There were several reasons for that.Mussolini seized power through military means. His views were not necessarily representative of those of most Italians. Mussolini did not build a strong relationship with the Italian people after seizing office. He had no reason to rely on the Italian people to stick with him through thick and thin. Most Italians did not believe in Mussolini’s dream of a revived Roman Empire, and thought his foreign adventures were rather pointless. Italy was unprepared for war. It lacked a strong military culture and strong military traditions. Its army was not afforded the weapons which would have been necessary to destroy Britain’s Matilda tanks. Its military leadership was lacking. It’s hard to maintain high morale when it’s obvious that your opponent has a much better sense of what he’s doing than your own military has of what it’s doing.
Note that all four problems existed before Hitler came to power in Germany. It’s not as though Mussolini’s Italy had a great military tradition, which then collapsed once Hitler and Mussolini became allies. On the contrary: Italy’s military tradition and military preparedness were greatly lacking both before and after Hitler and Mussolini became allies.