Economic crisis in the European periphery: An assessment of EMU membership and home policy effects based on the Greek experience

• Simple macro model incorporating issues of economic and financial crisis in Greece.
• Home policy effects of Greece's EU membership.
• Impacts of enhanced EMU transfers on structure of Greece's economy.

In this paper we examine the evidence on the impacts on the Greece economy of enhanced transfer assistance from the EMU as well as that of the domestic policies of the Greek government. A simple macroeconomic model is constructed to incorporate the issues related to the formation of the economic and financial crisis in Greece, and to analyze the impacts of Greek government's domestic policies. The model's solution is employed to highlight the outcomes that we believe could be related to EMU membership and Greek government policies after assuming membership. Our finding is that intervention by the Greek government either worsened the harmful impacts of the transfers, or altered the outcomes in a deleterious fashion; the policies which were put in place were of a nature leading unavoidably to a severe economic crisis and eventual bankruptcy.