By Daniel Michaels

BRUSSELS -- European leaders are to begin debating a financial proposal that some have called a "Hamiltonian moment" on Friday, evoking a turning point in U.S. history 230 years ago.

So, what is a Hamiltonian moment and why would Europe have one?

European Union leaders are talking about jointly issuing hundreds of billions of euros in debt to spark an economic recovery from the coronavirus crisis, particularly in Italy, which was already struggling economically. The EU has never borrowed so much, and its members have never jointly assumed responsibility for each other's finances on anywhere near this scale.

To some fans of American history, or Broadway theater, the European proposal is reminiscent of a plan that the new republic's first treasury secretary, Alexander Hamilton, proposed in 1789.

The U.S. had just adopted the Constitution to replace the Articles of Confederation, under which the country was more of an alliance -- a united group of states -- rather than a unified country made up of units called states. The states managed their own finances and even used their own currencies.

The EU today is a group of 27 sovereign states united firstly around trade -- and not a political union, as the U.S. was from inception. EU taxation power remains with member states and centralized authority is modest. The EU does have a common currency, the euro, but only 19 members use it.

Like Europe's financial situation today, six years after the Revolutionary War ended, many U.S. states were drowning in debt, which had been raised to fund the fight. The new federal government was barely established and its finances were shaky. Congress had never had an independent revenue source and during the Rebellion resorted to begging states for money and manpower.

"This led many states to act selfishly and shirk their national obligations," said historian Ron Chernow, whose 2004 biography of Hamilton inspired the eponymous Broadway musical. "For Hamilton, the lack of a federal source of income was a critical weakness of the central government and shaped much of his later thinking about the political structure the country should have."

As part of a broader deal that eventually included creating a new capital on land carved from Maryland and Virginia, Hamilton proposed that the federal government assume the indebted states' obligations.

Presented to Congress in his Report on Public Credit, Hamilton's plan called for the federal government to become national paymaster. The assumption of state debt was the centerpiece of his financial system.

"Although it sounds technical and boring, it was the single greatest contribution he made to the creation of the federal government," said Mr. Chernow. "Everything else simply pales beside it."

The EU today isn't going so far: It isn't talking about assuming any existing financial obligations from member states but instead sharing a specific set of future debts. The distinction prompts some observers to discount parallels between current and historic events.

"We're not talking about a federalization of debt here," said former U.S. Ambassador to the EU, Anthony Gardner. He said the EU plan is historically significant but "it's not really a Hamiltonian Moment."

Others see similarities aside from the issue of assumption, as Mr. Hamilton's debt plan was called. Debates about Hamilton's plan raged in 1790, with several states and many citizens arguing his ideas represented excessive centralization -- a power-grab that would impinge on freedoms the states had just won in the bloody, eight-year Revolution. States with healthy economies also didn't want to shoulder the debts of their neighbors.

Many Europeans now believe that letting the EU's executive arm, the European Commission, issue debt -- and potentially introduce EU-wide taxes to raise funds for them -- similarly represents excessive centralization that risks usurping their national power of the purse. In richer EU countries with healthy economies, such as Sweden, Denmark and the Netherlands, many people oppose paying debts for poorer and less-well-managed southern neighbors that have been hobbled by the pandemic.

German Chancellor Angela Merkel, French President Emmanuel Macron and European Commission President Ursula von der Leyen argue that joint debt issuance is both economically and morally important, since individual countries weren't to blame for where the virus struck, and financial pain in one big eurozone country such as Italy would affect the whole bloc.

Those positions echo Hamilton's lobbying for federal assumption of state debt. He argued that "the debt had been generated by the Revolution, that all Americans had benefited equally from that revolution, and that they should assume collective responsibility for its debt," Mr. Chernow wrote in his Hamilton biography. "If state debts were unequal, so were the sacrifices made during the fighting."

The EU's plan is Hamiltonian because the political imperative behind his plan was the burdensome cost of the Revolution, a common struggle for all the states, said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, D.C.

"Europe is now facing a common struggle from the pandemic and its fallout, and the idea is you agree to go into debt jointly to fund the cost," said Mr. Kirkegaard. "That's the essence of what Hamilton did."

Some critics of the EU plan say that Hamilton nudged the U.S. toward financial integration and that could happen now in Europe. Mr. Kirkegaard notes that it took almost 140 years to happen in the U.S. Congress only gained power to levy a national income tax with the 16th Amendment in 1913, and until the New Deal in the 1930s it rarely raised debt, usually to fund wars.

Still, it was a small move that had a profound impact.

"Hamilton's political genius was the way he cunningly hid an entire political program inside a seemingly technocratic measure. By assuming state debts, he knew the federal government would forever after have first rights over revenue sources," said Mr. Chernow. "The assumption of state debt contributed to a powerful centralizing tendency of the U.S. government under Hamilton. Even his Jeffersonian successors found it very hard to undo what he had done, so deeply was it now embedded inside the government structure."

EU leaders aren't expected to bridge disagreements on their debt plan during their video summit planned for Friday. At least one in-person summit is likely next month for further negotiations.

If the EU leaders fail to agree terms on Friday, they will miss one truly Hamiltonian moment: The next day is the 230th anniversary of a dinner at Thomas Jefferson's lodgings in lower Manhattan where he, James Madison and Hamilton struck the deal that placed the nation's future capital at what became Washington and put the federal government in charge of finances.

Write to Daniel Michaels at daniel.michaels@wsj.com