I dunno. I really think the UK1 Taranto raid is overpowered. There’s no reason to send the AC back to England since it will get wiped out by the Germans’ surviving subs and airforce, the French fleet support in SZ 93 makes the Italians and Germans think twice about attacking the loaded carrier on Round 2 (and they have very limited/expensive units to counterattack with in the Med), plus on UK1 Britain HAS to build all inf anyway to prevent a Sealion attempt and has no money to fortify the AC stack against the German subs and air. The raid is the only reasonable choice an experienced A+A player can make, and its OP since there’s really no counter.
That being said, how do the Axis get around it? I’m think maybe Germany could build a minor IC in Yugoslavia or S. France and start pumping 3 subs a round + a CV every now and then into the Med to bolster the Italians weakened fleet. It will end up getting very expensive however, building 1/3 of Germany’s IPCs into navy, plus the units will be far away from Britain and have a hard time getting through Gibraltar into the Atlantic once the Allies capture it with US’s 82 IPCs a turn (I don’t see Italy/Germany outpacing the UK and US for loaded transports to send to Gibraltar to take it, much less hold it).
Perhaps the Germans could try invading Spain with their forces leftover in France? This way they could send masses of infantry built in France/W. Germany into Gibraltar without needing transports. Yes, the other neutral countries will become Pro-Allied, but Sweden is probably a lost cause anyway once the German Baltic fleet gets toasted, and if the Italians are smart the UK won’t have a transport in range/available in the Med to activate Turkey. The real downsides will be that Germany will have the N/B coast to defend, Spain’s coast to defend, AND Gibraltar’s coast to defend! Prob at the start it won’t be too bad, but once the US gets going I don’t know how the Germans are going to hang on to all three w/o severely weakening its attacks on Russia. But its still an option. If you could get a stack of 10 inf into Gibraltar with reinforcements available through Spain and France it’d take a hell of a long time before the Allies could get you out.