It was called the Weimer Republic. It was a democratic republic resembling (somewhat) the same sort of government the United States has. It failed for a number of reasons.
The first and most important was that the German population felt they had been sold down the drain. They felt that their government had failed them the moment the Versailles treaty was signed. There were many riots and uprisings that happened during the Republic. It was chaotic in Germany and unstable.
This anger that people felt had all the earmarks of "DO SOMETHING" and do it now. That psychology led to the rise of Hitler, although it was slow in coming. The treaty of Versailles had to be rewritten a couple of times simply because Germany was not paying. The terms were just too steep, but even if they were much more lenient, it wouldn't have made much difference. Germany was just too angry internally.
I would pick the last one, but it is awfully simplistic.
