Are you serious with that map? Because Germany would basically need to be in constant mobilization just to keep all the Eastern minorities under their boot. There was a reason WW1 Germany preferred to setup Puppet states and WW2 Germany just preferred to kill the original inhabitants.
But regarding a peace between Germany and Britain. Yes, Germany would have to say good bye to the colonies if they can't challenge Britain at sea. The Kaiser and the Junkers would definitely not be amused. I could well see them going for a costly Middle Eastern Campaign to aid the Ottoman Empire just to somehow get to humiliate perfidious Albion, and maybe convince London that Germany can threaten the Empire and they should totally get their colonies back and get some French and Belgian colonies too.
But regarding a peace between Germany and Britain. Yes, Germany would have to say good bye to the colonies if they can't challenge Britain at sea. The Kaiser and the Junkers would definitely not be amused. I could well see them going for a costly Middle Eastern Campaign to aid the Ottoman Empire just to somehow get to humiliate perfidious Albion, and maybe convince London that Germany can threaten the Empire and they should totally get their colonies back and get some French and Belgian colonies too.