Compromise peace (World War I)

On the surface, it is strange that despite the military deadlock, the belligerents did not reach a compromise peace. However, since Germany's aims were fundamentally incompatible with those of the Allies, and almost to the end both sides believed that the war was winnable, it is not surprising that the struggle went on. Despite some sporadic attempts to find common ground, it was not until autumn 1918 that Germany, clearly defeated, staged a deathbed conversion to the idea of a compromise peace.
France's immediate aim was to expel German troops from its territory. In the longer term, many desired the return of the provinces of Alsace-Lorraine, annexed by Germany after the war of 1870-71, and the crushing of German power in some form, thus enhancing French security for the future. Britain went to war because it saw a German victory as a threat to its security. For centuries, Britain had fought to maintain the balance of power in Europe, to ensure that no state became overmighty. The Kaiser's Germany followed Napoleon's France, and preceded Hitler, as a threat to stability. In particular, Britain was highly sensitive about Belgium. In the hands of an enemy, Belgian ports offered a major threat to the British naval supremacy and hence the security of the British Isles. Britain had no real option but to go to war in 1914. If France had been defeated, Britain would have been faced with the nightmare that since the days of Elizabeth I it had fought to avoid: the continent dominated by a single, aggressive state.
http://www.bbc.co.uk/history/worldwars/wwone/origins_03.shtml