No the confusion comes from the fact that in Boldfresh’s example, the territory is no longer neutral.  But Eggman pointed out that it is not friendly either.

Ryder,

The rule is on page 11 of the Europe 2e rulebook.  Top of the page, right hand column.

“An attack by either alliance on a strict neutral territory (whether successful or not) will result in all remaining strict neutrals immediately becoming pro-Allies or pro-Axis, depending on who violated the strict neutral’s neutrality. For example, if Germany attacks Sweden, all the other strict neutrals on the map would take on a pro-Allies status for all purposes.”

The submarine rules are continued on page 17.

“Once all attacking and defending submarines that conduct a Surprise Strike attack have fired, the casualties they have generated are removed from the game and this step (step 2) is over for this round of combat.”

Basically, the only units that get to defend from Surprise Strike are submarines.

Munchkinman
Springfield, Missouri
Axis & Allies Classic, Axis & Allies 1940 (Global, Pacific, Europe)

Axis & Allies
Veterans Day Event
November 11, 2011
2:00pm—10:00pm

I will be running a demonstration game of Axis & Allies: Global 1940.

The game will be held at:
Meta-Games Unlimited
3309 East Sunshine
Springfield, MO 65804
Phone: (417) 881-9390

I just got Europe 1940 for Father’s Day, I just found this website, and I live in Springfield.  Anyone available for a game some time this summer?