England crashed out of Euro 2012 on Sunday night, suffering another penalty shoot-out defeat as Italy advanced to the semi-finals where they will play Germany.
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Former West Ham forward Alessandro Diamanti scored the decisive spot-kick after 120 minutes of football had failed to produce a goal.
The game got off to a much more lively start than many would have been expecting and both sides could have scored inside the first five minutes.
Italy very nearly took an early lead when Daniele de Rossi unleashed a superb shot with the outside of his left foot from 25 yards which beat Joe Hart but came back off the post, then just moments later at the other end of the pitch, James Milner's low cross was met by Glen Johnson, who nearly finished off the move he had started, only for Gianluigi Buffon to save well.
The pace of the game started to slow after the opening 15 minutes or so, but England were looking comfortable, with Johnson and Ashley Cole looking to push forward whenever possible, and Danny Welbeck winning every header in the air.
But Italy again created a good chance when Mario Balotelli was played through the middle by Andrea Pirlo, beating the England offside trap, only for John Terry to get back and block the Manchester City striker's shot.
Pirlo was becoming more of an influence as the first half progressed and he was involved again shortly before half-time, playing in a beautiful ball for Antonio Cassano, who headed it down for Balotelli, who looked like he was going to score only for Joleon Lescott to scramble the ball away in front of goal.
Although goalless at half-time, the opening 45 minutes were entertaining, and the opening stages of the second half was more of the same as Italy created several good chances to take the lead in the minutes after the restart, with Pirlo again instrumental, and Balotelli taking up good positions.
England reacted to being put on the back foot by bringing on Andy Carroll and Theo Walcott for Welbeck and the disappointing Milner.
The two substitutes combined as England went close, with Walcott crossing for Carroll and the ball eventually falling to Ashley Young, whose shot went narrowly wide.
As the game entered the final twenty minutes, Italy continued to look like the more likely side to finally break the deadlock, recording 16 shots to England's six, as they dominated the middle of the park. Steven Gerrard and Scott Parker were struggling against Pirlo, although the Azzurri were creating less in the final third than was the case earlier in the half.
Italy brought on Alessandro Diamanti and Antonio Nocerino on for Cassano and De Rossi for the final ten minutes of normal time, and Diamanti made an immediate impact, forcing a save out of Hart.
Nocerino also went close and could have won it towards the end of 90 minutes only for some excellent last-ditch defending from Johnson.
Despite Italy dominating large spells of the game, England held on and took the game to extra-time after seeing an injury-time attack end in Carroll heading across goal for Rooney, whose overhead kick went over the crossbar.
Italy made their final substitution with Christian Maggio coming on for Ignazio Abate, while England boss Roy Hodgson brought Jordan Henderson on for Parker.
The Three Lions were much improved in the first half of extra-time, with Carroll holding the ball up well, but Italy continued to look dangerous whenever Pirlo was on the ball, and on two occasions he created good chances for Balotelli, while Alessandro Diamanti could have opened the scoring when his cross was misjudged by Hart and bounced off the post and out of play.
Italy continued to see more of the ball and over the 120 minutes had made more than twice the amount of passes England had managed to string together. But they were not incisive in the final third, and with Hodgson's side hanging on - including seeing Italy have a goal ruled out for offside six minutes from time, the game went to penalties.
Balotelli put Italy's first spot-kick away, with Gerrard scoring first for England.
But Riccardo Montolivo missed Italy's second penalty, with Rooney putting his away to give England the advantage.
Pirlo converted his spot-kick with the cheekiest of chips, before Ashley Young lashed his penalty against the crossbar to even things up again.
Nocerino then sent Hart the wrong way with his spot-kick, before Ashley Cole failed to level the scores when Buffon saved his poor effort.
Diamanti then stepped up and made no mistake as Italy won the shoot-out 4-2 to set up a clash with Germany on Thursday night for a place in next Sunday's final.