EU leaders are heading to a summit in Brussels, hours after a long-awaited pact was agreed on how to respond to failing eurozone banks.
Under the plan a 55bn-euro ($75bn; £46bn) fund would be set up, financed by the banking industry, over 10 years.
A new European resolution authority would be created, which would decide when and how banks would be closed.
The deal is part of wider efforts towards building a banking union to avoid taxpayer-funded bank bailouts.
On paper, the agreement represents the biggest centralisation of power in the European Union since the launch of the euro, BBC Europe correspondent Chris Morris reports.
The UK and 10 other non-eurozone economies are not part of the deal.
Under the complex agreement, a resolution fund paid for by the banks themselves would gradually merge national pots into a common European fund over the course of the next decade as a new European agency, the resolution authority, is set up.
The idea, says the BBC's business editor Robert Peston, is to minimise the collateral damage from bank failures.
But he says the fact that eurozone finance ministers have retained the powers to decide the fate of failing banks does not augur well for speedy action.
And the 10-year lead time will not reassure the creditors of Spain and Italy, for example, that they will not end up liable.
Perhaps most of all, 55bn euros is but "a pimple in the context of the monumentally huge balance sheets of eurozone banks" - less than it cost to bail out just the Royal Bank of Scotland - our editor says.
The agreement, hammered out after months of negotiation, will be considered for approval by EU leaders when they meet later on Thursday. They have been keen to finalise a deal before new bank "stress tests" begin next year.
Defence co-operation is also on the agenda, with budget constraints pushing EU governments to seek more joint solutions to security challenges.
Three pillarsGerman Finance Minister Wolfgang Schaeuble said that by agreeing the deal "we have created the banking union's final legal pillar".
The first pillar of banking union will take shape next year when the European Central Bank sets up a supervisory body to monitor all 6,000 banks in the eurozone. Germany and some other countries want to retain their own high degree of supervision over smaller banks, which are reckoned to pose less systemic risk.
The ECB's stress tests of banks are expected to reveal that some are overexposed, and will require new injections of capital.
This is clearly a long way from a perfect solution. It is a very complex compromise - some say too complex to ever work effectively.
Still the fact that anything has been agreed is significant. Bank resolution has always been a very sovereign issue, dealt with by individual countries. So any move towards a common European system is worth noting, and that's why this can be seen as the biggest centralisation of power in the EU since the creation of the euro.
Some Eurozone member states want to go much further and still believe they can. But countries that are sceptical about pooling financial risk like Germany (and others) remain hesitant at best.
The bottom line is that the search for a real pan-Eurozone financial backstop goes on, and without one there will plenty of people arguing that this is not a proper banking union.
The second part is the Single Resolution Mechanism. This means that if a bank anywhere in the eurozone gets into trouble, the process of bailing it out - or even letting it go bust - would be managed by a common "resolution authority".
The final pillar is a common deposit guarantee. There is already general agreement on an EU-wide deposit guarantee of 100,000 euros (£84,000; $138,000) per saver. But the aim is to have a common rulebook covering bank accounts across the EU and eventually a joint fund to compensate for losses when a bank gets into trouble.
Single market tensionsAt the summit, UK Prime Minister David Cameron is expected to raise the issue of migrant workers again, as the UK seeks to tighten up its social benefit rules for migrants.
France has seen heated debate about the rules for posted workers - that is, temporary workers brought in from another EU state.
The lifting of labour market restrictions for Bulgaria and Romania next month has made the issue more acute, because of fears in some areas about "social dumping" - that is, cheap foreign workers replacing locals.
Under current rules a foreign employer can pay social security contributions in its home state. That can give a competitive advantage in countries like France, where social security costs are high. There are also concerns about the working conditions of imported temporary workers.
The summit chairman, European Council President Herman Van Rompuy, has told EU leaders that reform of the posted workers directive needs to proceed rapidly. There is a push to get the negotiations finished before the May European elections.
On defence co-operation, the Commission sees scope for savings, highlighting that there is too much duplication in Europe's armed forces. Defence industries employ about 750,000 people in the EU and annual turnover is about 170bn euros.
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