Final answer:
The most controversial penalty from the Treaty of Versailles was the war guilt clause, which resulted in Germany being blamed for the war, paying massive reparations, and facing severe military limitations.
Step-by-step explanation:
Of all the penalties imposed by the Treaty of Versailles, the one that generated the most outrage in Germany was the war guilt clause, otherwise known as Article 231. This clause forced Germany to accept full responsibility for initiating World War I and the subsequent destruction. Moreover, it served as the basis for demanding massive financial reparations of around $33 billion from Germany, which left the country economically destabilized and politically humiliated. Alongside the war guilt clause, heavy territorial concessions were required, including the return of Alsace and Lorraine to France, and the severe limitation of Germany's military capabilities, with the German Army restricted to 100,000 troops and prohibited from developing certain types of military equipment, such as submarines and warplanes.
The repercussions of these impositions included not only financial crippling but also a surge of national indignation that eventually contributed to the rise of Adolf Hitler and the Nazi Party, setting the stage for World War II.