the only 2 ways i can see Italy with the allies, keeping the same tl until 36/37 would be :
- if Mussolini keeps he's guarantee on Austria and even form an official alliance with Austria and Hungary more solid than the Rome protocols and places is army on the Austrian-German border in the 37/38 crisis
- Mussolini dies( stroke?) and the king appoints Balbo as new duce( not member of the old guard and pretty charming among the population) who is a germanophobe and doesn't for an alliance with Austria but guarantee's their independence.
the 2 option re-converge if angry Adolph declare war on austria with italians and hungarians going in help. At this point both france/england would join austria defence since they know italy isn't enought to stop the angry mustache and they don't want him to have mediterranean access.
by 1939( ironically) the war would be already a loss for germany since they weren't ready for a full war yet, haven't repayed the mefobills with austrian/czech gold and hasn't the czech/polish workforce, with britain blocking the north sea and france on the maginot line( the british corps would be partially on the belgium/netherlands territories to prevent any surprise attack)
a peace treaty in the early '40s would be something like:
-austria minor concessions on the border
-italy some colonies from england/france for the prestige OR a carte blanche over jugoslavia nor greece
germany will have to demilitarize all the country, arrest all the nazi leaders, ban the nazi party( but not the fascist one if exists) and pay all the reparations to the allies, while it's fleet( probably not even left the baltic) would be split between the 3 majors
At this point with the new crisis after EW( european war 1?) germany might become commie or see a return of the kaiser supported from the junkers, if it happens the first one we might see a later partion of poland in 1944(?) and germany joining the comintern then leaving to stalin the beginning of WW2 democrats/fascist VS commies ( electric boogaloo).
For any grammar mistake i apologize, else for historical accuracy pls correct me