There are 6 neutral countries in the game. It is recommended that if you are a new player you start playing one of the neutral countries. The difficulties of the neutral countries when joining either faction are as follows:
A neutral country cannot win the game if it doesn't declare for either faction. In addition, a major country such as Italy, West Germany, East Germany, UK or France can declare war on any neutral country from their government centre at any time after a short grace period at the start of the game. Doing so will push the country to the other faction. This is usually done so that a faction can take your land and economy for their own. In this case it is recommended that you join a faction before someone gets greedy and to build and keep a sizable army to defend yourself from threats.
WW2: Shattered Europe is a diplomatic game, so think carefully before making the choice to join either faction. Once you have joined a faction think how best you can augment your faction's armies. For example if you are Greece and you went Allies, just being a thorn in the Axis side can be annoying enough, by building a lot of defenses at your border and raiding the Axis war machine. Same if you were Finland and you went Axis, making moves that bleed precious resources away from the Soviet Union. If you went Axis Nationalist Spain you might want to consider getting a Navy to blockade the Atlantic. Or if you were an Allied Sweden you can get an Airforce to raid central Europe.
A neutral country cannot in general fight a major country by itself. Neutral countries units are generally weaker than a major countries units, for example, head to head a medium advanced tank won't beat a Comet tank, the equivalent of the medium advanced tank for the British. To defeat a major faction's armies you must outnumber them or counter their units appropriately. A neutral country in general cannot hope to outproduce a major country in the long run. Exploiting weaknesses in their defenses or armies before they can bring the appropriate counter up to bear however can allow you to defeat a major country and take their cities and resources for your own.
Use bunkers and defensive lines to hold territory. They are a cost efficient way of slowing an enemy advance such that any time wasted on you gives your allies time to build a bigger army. When helping your allies push into territory, consider opening up another front, splitting up their attention and armies. Or you can march alongside allied armies, helping overwhelm defenses, protect the flanks and take cities faster. WW2 was a war of combined arms and different tech paths should not be neglected. Going down a particular research path will give your faction more tools and options to fight, that opponents will find difficult to counter.