Culminating in the political assassination of Aldo Moro in May 1978, terrorism in Italy has been a continuing and increasing problem. It is estimated that Italy now has a terrorist attack of some form once every 4 hours, a world record. This article describes Italy as illustrative of the current growing cleavage between northern and southern Europe with its long-term implications for the entire Western community and the development of transnational terrorism. It also discusses the rise of a powerful Communist party (PCI) after 1974, regarded by almost one-third of the electorate as the party of law and order. It describes the gradual economic recovery stemming from the disastrous June 1976 election period when unpaid foreign loans totalled $18 billion and the foreign trade deficit reached 5.4-trillion lire. Recent terrorism in Italy in the form of bombing, arson attacks, kidnappings, and assassinations is related to current economic and political uncertainties. Terrorism includes right-wing as well as left-wing extremist movements and has been part of the radicalization of student movements. The article suggests that the existing social tensions will probably persist into the 1980's, that the moderates will adjust to the violence, and that the tension will remain high. Twenty-seven references are included.