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Alexander Hamilton’s Eurozone Tour

For many Europeans, Alexander Hamilton’s negotiation in 1790 of the new US federal government’s assumption of the states’ large debts like a tempting model. But, as Hamilton knew well – and as subsequent US history showed – debt mutualization by itself could not guarantee political union.

PRINCETON – Europe’s debt crisis has piqued Europeans’ interest in American precedents for federal finance. For many, Alexander Hamilton has become a contemporary hero. Perhaps one day his face should appear on the €10 banknote.

Specifically, for European states groaning under unbearable debt burdens, Hamilton’s negotiation in 1790 of the new federal government’s assumption of the states’ large debts looks like a tempting model. Indeed, after Thomas Sargent won the Nobel Prize in Economics last year, he cited it as a precedent in his acceptance speech.

Hamilton argued – against James Madison and Thomas Jefferson – that the debts accumulated by the states during the War of Independence should be assumed by the federation. There were two sides to his case, one practical, the other philosophical.

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