September, 1938 Munich negotiations break down due to unreasonable demands by Germany and Czech rejection of the treaty. French Army with assistance of British Expeditionary forces attacks into Germany after Germans declared war on Czechoslovakia. Hitler arrested and executed by German generals.
1939 Germany and Entente sign peace treaty. Germany forbidden having any armed forces at all. Nazi party and institutions disbanded. Austria reestablished. Free elections organized. Propaganda efforts by Allies bear fruit and democratic party, although conservative and right leaning takes hold. Soviet Union retreats into isolation, waiting for 'inevitable' proletarian revolution in the west.
1940 Japan retreats from China under combined influence of major world powers. Government falls as military ministers retreat from government. Short lived military government follows, but then navy and civilian members of government together with emperor and dissenting army officers create new government. Part of army rebels, but many units remain loyal to emperor. After one of the regiments attempts to take over imperial palace and kill emperor, most of the army turns against rebels. Mini civil war ensues. In the meantime Korea rebels and helped by Soviets forms communist nation. Chinese nationalist move against Japanese on all fronts and liberate most of China. Civil war ensues, but Nationalist are more popular as they liberated most of China and possess more weapons so they win against Mao. Mao escapes to Russia and forms small PLA of Communist China. Manchuria remains Japanese, but barely.
In the meantime German government initiates economic reforms. Many Nazi created concerns and monopolies are partitioned and economy deregulated. Many companies fail, especially ersatz production of raw materials. Automobile and machine tools industry thrives, as well as chemical and electronic industry. Aeronautic industry slowly reorients towards civilian production.
1941 Japan stabilizes. Under international pressure they recognize Korea and grant autonomy to Formosa. Having observed significant success Germany enjoys in opening their market up, Japanese start similar economic reforms.
By 1945 world largely stabilizes. UK grants dominion status to India with optional independence once deal is reached between Muslims and Hindus. British forces maintain peace and order. France and Germany attempt reconciliation. Germany elects centrist government and they propose better economic ties between them and France. Mussolini dies in Italy. King disbands fascist council and calls for free elections. Catholic democratic union wins. Although rightist, with Badoglio in place of Prime minister they push for granting independence to the colonies of Somalia and Abyssinia. After seeing India moving toward independence, Arabs in British Mandates protest for independence. UK considers uniting all Arab populated 'mandates' into a single dominion. Jewish immigration into Palestine is largest issue, as British demand Arab grant them minority status in case of independence. Negotiations drag on. Soviet Union appears internally stable, but underneath people are tired of constant purges. As Stalin initiates next big purge, officers of Army and NKVD rebel. Beria and Molotov poison Stalin during Poltiburo meeting. They proclaim that Soviet Union will open up for trade and diplomatic relations with rest of the world.
By 1950 India and Pakistan granted independence. Population transfer is executed under control of British forces and there is no bloodshed. Mutually accepted borders are signed by both governments. Germany reports they have managed to build first operational nuclear reactor by a team headed by Heisenberg and Currie. Joint French-German atomic energy company is formed and they offer building reactors to everyone. In secret, both countries work on 'atomic bomb' as a counterbalance for Soviet Union. Arab republic is formed of former British mandates in Middle East. Iraq and Saudi Arabia offer to join them. French mandates rebel, and are granted independence. Orderly decolonization of British African colonies is considered and approved by UK government.
1955 Spain, Italy, Portugal and Low countries join France and Germany. Germany signs customs union with Czechoslovakia, Poland, Austria and Hungary. Yugoslavia falls apart after death of the King. Croatian 'banovina' declares independence, Slovenia declares independence. Bulgaria threatens to take over Macedonia, while Albania demands Kosovo to be given to them. Germans, Italians and French intervene. They organize referendums in disputed territories and divide them. Result is enlarged Albania, Greece and Bulgaria. Serbia and Montenegro remain together. Croatia recognized by all in borders established by Cvetkovic-Macek agreement. Slovenia enters customs union with Germany. Baltic countries warn world of Soviet demands. European powers pledge protection. Joint Franco-German a-bomb detonated in Algeria. The European powers deploy troops in Baltic countries. Baltic countries join customs union. Germany and France propose even greater diplomatic and political ties. USA, isolationist for all this time, proposes to Britain to establish a mutual alliance. They fear Europe will be too strong economically.
OOC: Well this is a proposal. There is no Israel at all. Jews in Europe are safe and remain in their places. How it goes on I do not know. This is written from top of my head. I forgot about USA completely so I just mention them in the end.