In autumn 1918 the allies had clearly won the war. Germany was in a state of chaos. The allies offered Germany peace, but under strict conditions. One condition was that Germany should become more democratic. When the Kaiser refused, sailors in northern Germany mutinied and took over the town of Kiel. This triggered other revolts. The Kaiser's old enemies, the Socialists, led uprisings of workers and soldiers in other German ports. Soon, other German cities followed. In Bararia an independent Socialist Republic was declared. On 9th November 1918 the Kaiser abdicated his throne and left for the Netherlands.
The following day, the Socialist leader Friedrich Ebert became the new leader of the Republic of Germany. He immediately signed an armistice with the allies. The war was over. He also announced to the German people that the new republic was giving them the freedom of speech, freedom of worship and better working conditions. A new constitution was drawn up.
The success of the new government depended on the German people accepting an almost instant change from the traditional, autocratic German system of government to this new democratic system. The prospects for this did not look good.
The reaction of politicians in Germany was unenthusiastic. Ebert had opposition from both right and left. On the right wing, nearly all of the Kaisers former advisers remained in their positions in the army, judiciary, civil service and industry. They restricted what the new government could do. Many still hoped for a return to rule by the Kaiser. A powerful myth developed that men such as Ebert had stabbed Germany in the back and caused the defeat in the war. On the left wing there were many Communists who believed that at this stage what Germany actually needed was a Communist revolution like Russia's in 1917.
Despite this opposition, in January 1919 free elections took place for the first time in Germany's history. Ebert's party won a majority and he became the President of the Weimar Republic.

One left-wing group was a Communist party known as the Sparticists. They were led by Karl Liebknecht and Rosa Luxemburg. Their party was much like Lenin's Bolsheviks, who had just taken power in Russia. They argued strongly against Ebert's plans for a democratic Germany. They wanted Germany ruled by workers' councils or Soviets. Early in 1919 the Sparticists launched their bid for power. Joined by rebel soldiers and sailors, they set up Soviets in many towns. Not all soldiers were on the side of the Sparticists, however. Some anti-Communist ex-soldiers had formed themselves into vigilante groups called Freikorps. Ebert made an agreement with the commanders of the army and the Freikorps to put down the rebellion. Bitter street fighting followed between the Sparticists and the Freikorps. Both sides were heavily armed. Casualties were high. The Freikorps won. Leibknecht and Luxemburg were murdered and this Communist revolution had failed.

The next crisis to hit the new republic came in May 1919 when the terms of the Treaty of Versailles were announced. Germany lost:
10% of its land
all of its overseas colonies
12.5% of its population
16% percent of coal and 48% of its iron industry.
In addition:
its army was reduced to 100,00 and was not allowed an airforce, Navy was reduced.
Germany had to face the blame for starting the war and had to pay reparations.
Most Germans were appalled. Supporters of the Weimar government felt betrayed by the allies. The Kaiser was gone - why should they be punished for his war and aggression? Opponents of the regime turned their fury on Ebert.
Ebert was very reluctant to sign the treaty, but he had no choice. Germany could not go back to war. However, in the minds of the Germans, Ebert and his Weimer Republic were forever to blame for the treaty.The injustice of the treaty became a rallying point for all Ebert's opponents. They believed that the German army had been "stabbed in the back" by the Socialist and Liberal politicians who agreed an armistice in November 1918. They believed that not that Germany had been beaten on the battlefield, but that it had been betrayed by its civilian politicians who didn't dare continue the war. The treaty was still a source of bitterness when Hitler came to power in 1933.

The Treaty of Versailles destabilized Germany politically, but the Germans also blamed it for another problem - economic chaos.
The Treaty of Versailles forced Germany to pay reparations to the Allies. The reparations bill was announced in April 1921. At was set at £6,600 million, to be payed in annual installments. This was 2% of Germany's annual output. The Germans protested that this was an intolerable strain on the economy which they were struggling to rebuild after the war, but their protests were ignored.

Because it had no goods to trade, the government simply printed more money. For the government this seemed like an attractive solution. It paid off its debts in worthless marks, including war loans of over £2200 million.
This set off a chain reaction. With so much money in circulation, prices and wages rocketed, but people son realized that this money was worthless.

The first installment of £50 million was paid in 1921, but in 1922 nothing was paid. Ebert did his best to play for time and to negotiate concessions from the Allies, but the French in particular ran out of patience. They too had war debts to pay to the USA. So in January 1923 French and Belgian troops entered the Ruhr ( quite legally under the Treaty of Versailles) and began to take what was owed to them in the form of raw materials and goods.
The results of the occupation of the Ruhr were disastrous for Germany. The government ordered the workers to carry out a passive resistance, which meant to go on strike. This way, there would be nothing for the French to take away. The French reacted harshly, killing over 100 workers and expelling over 100,000 protesters from the region. More importantly, the halt in industrial production in Germany's most important region caused the collapse of Germany's currency.