Austrian collapse in 1916

This is inspired by a Hearts of Iron 2 game I'm playing, a WW1 mod as Italy. So excuse me please if you think it's ASB. :p

Germany invaded through Alsace-Lorraine instead of Belgium, so Britain didn't joined the war. Their initial French offensive was quite successful, capturing Nancy before getting bogged down in trench warfare. On the east the Germans and Austrians repulsed the Russians early on and started making decent headway, capturing Poland and parts of western Ukraine. The Serbs however managed to keep Belgrade! Then Italy joined the war in Spring 1915 as historically, and immediately pushed the Austrians back over the Alps. With German support they managed to stabilise the Italian front, but then in early 1916 Romania joined the Entente (if the alliance called that in this TL) and the Austro-Hungarian armies utterly collapsed. Italian troops are now in Vienna, and could easily clean up the Danubian plain or even threaten Bavaria from the south. The Germans have the upper hand on both the French and Russian fronts, but no decisive victory looks likely any time soon.

In this scenario, does the Dual Monarchy seek a separate peace? Or would the Germans come to the peace table as well? If either are the case, what would be the outcome of the treaty do you think?
 
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