successful revisionist germany twin paths to victory

   Both of those two are valid options and Germany could be a markedly more dangerous threat to the rest of Europe with either. I'm not sure that the reliance on oil driven machines is that much an impossibility as that was basically what they needed for the Blitzkrieg unless your assuming a slower more traditional style of war, which is likely to be bloodier for them. Even with a fully mechanised military, which is helped by a larger civilian mechanised sector you will still need a hell of a lot of vehicles to win, especially in the east.

there can be no combination of the two a compromise between the socialist and the monarchists is hard to imagine and the policy of such a confused state will not lead to victory

i have a general idea of the royalist germany general strategy and development

1931 - aging hindenburg steps down and "gives" the presidency to kurt schlicher
the ever schiming schlicher makes a dirty deal with Generaloberst Ludwig Beck

using the resources of the army Beck discovers the "nest of deviants" in the nazi party
the opium addiction of Hermann Göring
the sexual proclivities of ernst Röhm
and worst of all the money the Streicher brothers took from the soviet union to destroy the fatherland (provocation)

in the 1932 elections the nazis crash and burn with the dvp and the royalists taking their votes
nazis and communists riot in the streets for a week

the military the industrialists and average hans and helga has had enough of this
the okw and the christian labor unions backed by their owners crush the nazis and the kdp with extreme prejudice
a week of "Blut reinigen" ensus
the army and the old industrialists are shocked the jews are not deserting to the kdp side in droves
a psychological barrier is broken

a new deal between workers unions and industrialists is singed
secular trade and workers unions and paramilitary groups are abolished as enemies of the people
the catholic and lutheran trade unions unite and jews are formally accepted an all german general union of workers is set up
in exchange to a voice in policy planing in the factories the owners secure the loyalty of their workers and gratitude of the state

a new german economic policy designed to fight unemployment and improve infrastructure is approved
consolidation and standardization of rail lines comence all over germany
new external rail links to austria switzerland the netherlands and belgium are prioritised

germany spends its gold reserves financing factory modernization and expansion with ruthless standardization in mind
german economic recovery is in full swing by 1935 with Hjalmar Schacht carefully spending the gold reserves and loaning more money

rearenament is methodical but far slower then in otl
the benz 3000 truck
the Walther Gewehr 41(W)
the steyr pistol
the Maschinengewehr 34
and the multi purpose 88mm were the main mass produced systems

tanks remained experimental
some new torpedo boats and destroyers were built 24 of each
a new generation of 10 light cruisers were built to keep the shipyards and krupp happy

plane development is same as otl with more naval emphasis Walther Wever working under competent management manages to consolidate some of air craft manufacturing plants
forcing common parts and common production technology wherever possible

long term barter deals with romania and hungary kick some life into the german economic machine
relations with the soviets worsen but are more then compensated by better links with the us and the rest of the americas

end september 1937

up next
the british deal
chinese business 
neues deutschland
the austrian civil war
spanish blockade
the fate of czechoslovakia
the hungarian restoration

Various scenarios may of course be feasible for a successful non-Nazi Germany. One of my preferred ones is Chancellor Bruning being successful in his early 1930s schemes to stabilize German democracy by means of a monarchical restoration and revise the Versailles status quo. The outcome is broadly similar to the second variant proposed by the OP.

In the early 1930s, Chancellor Heinrich Bruning set up a customs union between Germany and Austria which soon evolved into a democratic Anschluss. France was unable to interfere by sabotaging the German and Austrian banking system because the Great Depression hit it harder than OTL. Germany bought Mussolini's compliance by giving Italy a guarantee of German support for its ambitions in Ethiopia and the Balkans, as well as agreeing to transfer the German-speaking population of South Tyrol to Germany.

Bruning engineered Germany's political stabilization by organizing a deal between the DNVP, the SPD, the Zentrum, the Liberals, and a few other minor parties to restore the Hohenzollern monarchy with the former Crown Prince or one of his sons on the throne. Agreement between these parties granted a sufficient supermajority in the Reichstag to approve a revision of the Weimar constitution. The former Kaiser was unable to veto the deal because of his early death, and his son approved it, securing full support from Hindenburg and the Nationalists. The Reichstag canceled the 1932 presidential election, extended Hindenburg's term, and proclaimed a monarchy with Hindenburg as regent. Upon Hindenburg's death, Crown Prince William or one of his sons was invited to assume the throne. The restored Kaiser more or less kept the Reichspresident's powers, although most of his political decisions required the assent of the Chancellor or a competent Minister. The German government indefinitely suspended payment of reparations and started a massive public-works program that significatively reduced unemployment.

These policies considerably pleased the German public opinion and support for the NSDAP and the KPD substantially declined. The government picked the excuse of Nazi and Communist involvement in street violence to ban both parties. When their militias tried to stage a clumsy uprising in a uneasy alliance of convenience, the army crushed them without too much effort with the support of the Nationalist and Socialist militias. Bruning took the opportunity of monarchical restoration and the failed Commie-Nazi uprising to enact a comprehensive constitutional reform. It included introduction of a constructive vote of no confidence, an electoral law reform to curb political fragmentation and ban extremist parties, a change of German states' borders to balance the federal system, and a restoration of the other most prestigious German dynasties besides the Hohenzollern as local heads of state in various states. The latter included the Wettin in Saxony, the Wittelsbach in Bavaria, the Welf in Hanover, and the Habsburg in Austria. Political reforms, foreign-policy successes, and economic recovery spurred by public-works and rearmament programs stabilized German democracy and drained support for banned far-right and far-left extremist movements to fringe insignificance. The new constitutional monarchy system proved a compromise that all the remaining major German political factions (Nationalists, Christian Democrats, Socialists, and Liberals) and the Heer would more or less wholeheartedly support in good faith.

Germany re-established conscription, expanded the army to full size, and scrapped all weapons limitations, with the aim of land and air military parity with the Entente powers and the USSR. However it also offered a deal to France and Britain for a mutual and balanced arms limitations regime in Western Europe that would guarantee the securiy of both sides on the Rhine, Anglo-French control of the colonies, and Germany's security on its eastern border. The Germans scrapped unilateral demilitarization of the Rhineland but offered the French to establish a mutual, balanced demilitarization of Alsace-Lorraine and the Rhineland. They were able to make a deal with the British w/o excessive difficulty for a version of the Anglo-German Naval Agreement that included an extension of naval limitations to submarines. Negotiations between Germany, France, and Britain for a land and air forces limitation and border demilitarization treaty in Western Europe proved more complex but were ultimately successful. Germany and Italy negotiated a similar deal for demilitarization of their shared border after the Anschluss.

As a rule, non-existence of Nazism, ongoing Soviet rearmament, the perceived threat of Comintern subversion, and rumors of the brutality of the Stalinist regime drove public opinion in democratic countries aside of the far-left spectrum to deem Communism a much worse threat than Italian-style fascism. Italian conquest and annexation of Ethiopia and later Albania raised international tensions for a while, but soon the other European powers recognized and made themselves content with the new status quo, also because few cared much for the fate of Africans and Albania was already assumed to be in the Italian sphere of influence. When civil war exploded in Spain, it quickly evolved into a conflict between a Nationalist front dominated by pro-Italian fascists and a Republican coalition hegemonized by pro-Soviet communists. Both Italy and the USSR provided abundant support for their respective proxies. The German and British governments took a similar stance that regarded a Nationalist Spain a lesser evil than a Red one and provided a generous degree of economic, diplomatic, and economic support to the Nationalists under a paper-thin facade of neutrality. The Popular Front government in France was more sympathetic to the Republicans in principle but because of British influence and the fierce opposition of French right-wingers did not do much in practice to support the Republicans. The final outcome was a decisive victory of the Nationalists.

When German rearmament had progressed enough, the German government started to put increasing diplomatic pressure backed by its growing military power on Czechoslovakia and Poland for a revision of the status of the Sudetenland, Danzig, and the Corridor by means of internationally-supervised plebiscites. Britain and France took a stance on these disputes that wavered between aloof neutrality and sympathy for Germany's claims, or at least did not care enough for the territorial integrity of the Polish and Czechoslovak states and the Versailles status quo in Central Europe to risk a general war for their sake. Reasons for this stance included the lasting appeasement mood created by lingering memory of the Great War carnage and reinforced by successful compromise on the rearmament issue, the growing importance of Germany as an anti-Soviet bulwark, and the ability of the Germans to win international sympathy for their revisionist claims by framing them as a national self-determination issue of ethnic Germans. The Czechs eventually caved in to international pressure and isolation; the Soviets offered Prague military help but it proved impossible to deliver after the Poles and the Romanians refusd to give passage to the Red Army. A plebiscite gave the Sudetenland to Germany and southern Slovakia to Hungary.

The Poles stubbornly clung to the Versailles status quo and refused all German requests about a revision of the status of Danzig and the Corridor. Out of nationalist pride and overconfidence, they overestimated their own strategic importance and military capabilities, and underestimated resurgent German military power, the threat of Soviet intervention, and their own growing international isolation. The pro-German government of the Free City of Danzig eventually lost patience and organized a plebiscite under its own authority. When it approved union with Germany, the Danzig authorities moved to enact it and sever all ties with Poland. The Poles sent their army in the Free City to suppress the union, and the Danzig Germans appealed to Berlin for military protection. Fighting between German and Polish troops started in the Free City and soon escalated to a state of war between the two countries.

Britain and France refused any military aid to Poland under these premises and took a neutral diplomatic stance. The German army proved much more effective than the Poles expected, quickly seizing the upper hand in the conflict and sending the Poles on a rout with its new blitzkrieg weapons and tactics. Fate hammered down the last nail in Poland's coffin when the Soviets opportunistically exploited the situation to invade the eastern Polish territories and the Baltic states; the Polish army was utterly crushed in the resulting two-front war, despite the poor performance of the Red Army. The Soviets overrun and occupied Latvia and Estonia. Lithuania narrowly avoided a similar fate by hastily negotiating a deal with Berlin that put the country under German military protection in exchange for cession of Memelland to Germany. A larger military confrontation between Germany and the USSR loomed on the horizon for a while, but despite mutual distrust, the Germans and the Soviets were ultimately able to work out a deal for a partial partition of Poland and recognition of the new status quo about the Baltic states out of their common interest to enforce their respective claims.

Germany annexed Danzig, the Corridor, and Upper Silesia. Being mindful of their past bad experiences with Polish separatism, the Germans enacted a forced population exchange of the Polish population in the annexed territories and the remaining German minority in Poland. The German nationalists made a few calls to annex Posen too, but the German government declined to heed them since they wanted to keep the benevolence of Britain and France with a moderate peace deal, there were too many Poles in Posen, and they preferred to get less extensive but more lasting territorial gains. The USSR annexed the eastern Polish territories, Latvia, and Estonia, and their inhabitants became subject to Stalinist terror. Lithuania remained independent thanks to Germany's protection and annexed the Vilnius region.