The German army was a spent force, the navy was in open revolt and the Kaiser had little power. Empowering the regional governments of Imperial Germany, regions which all had their own cultural and historical roots and which were not unified until Prussia got it done a few decades beforehand, wouldn't have somehow magically revitalized Imperial Germany's armed forces any more than the much harsher treaties against AH did there... Or how the historical Versailles which spawned WW2 magically revitalized Imperial Germany's army when it dropped with assuming all war guilt, reparations, outright occupation of the Rhineland and Saar... and basically ignored Wilson's 14 points anyway since he was crippled physically, mentally and politically at that point.It's already been explained why that would never fly. For starters, the Germans were tired of war, but not tired of living. They actually threw in the towel with the expectation that Wilson's fourteen points were going to be the basis for the peace. Instead, the settlement was far more cruel. If the Germans had known how it would play out, they would've kept fighting.
If the prospect is the utter dismantling of Germany... they'll fight to the last man. And since they have basically nothing to lose, they'll be more motivated to keep fighting. Meanwhile, the French were also on the brink of collapse. If a chance to end the war was squandered due to some insane desire to vindictively destroy Germany, the French soldiers would mutiny. They'd say "to the Rhine, and not beyond it".
Also I dunno where you're getting that I'm saying this version of Versailles would be some Morgenthau Plan of destroying all industry in the area of Imperial Germany rather than the French/British working backward from our TL in using the Treaties of Saint Germaine / Trianon as their guides in writing Versailles.
Or, put another way, Bavarians being ruled from Munich in both domestic and international policy since the Republic of Bavaria is now a thing (and so on and so forth) is pretty far from them having nothing to lose and having to fight to the last man.
Edit: and I'm working from the perspective of 1918-19 where all the history that happened in reality of course wouldn't have happened here. Hitler is a well known architect, Himmler Foods is a part of Nestle and Goering became a snack for the same South Pacific cannibals who ate Amelia Earhart...
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