The agreement, which marks one of the biggest transfers of national sovereignty to the bloc since the creation of its single currency, will be put for approval to European leaders including German Chancellor Angela Merkel, just beginning a fresh four-year mandate.
The deal is expected to bolster Merkel’s pledge ahead of the summit to build a stronger Europe alongside key partner France.
Invigorated by a third term as leader of Europe’s biggest economy, she also highlighted her determination to push through unpopular reforms in the EU to ensure the financial stability of the bloc.
Just hours before the summit opens, the EU’s 28 member states thrashed out a deal to create a single body to police and wind up ailing banks, backed up by a fund to cover the cost, all without using taxpayers’ funds.
Eurozone member states drew the plan up after collapsing banks drove countries such as Ireland into costly international bailouts and brought the economy to a halt.
All 17 countries — soon to be 18 — sharing the single currency will be bound to the scheme while non-euro members have the option of joining.
French Finance Minister Pierre Moscovici called it “an accord that I believe is historic”.
“It’s therefore a day that is definitely important for the European Union,” he said.
EU Financial Markets Commissioner Michel Barnier said: “We are producing revolutionary changes to Europe’s banking system so that taxpayers will not foot the bill in banking crises, ending an era of massive bailouts.”
Crucially, it will promote “financial stability… so that banks can lend to the real economy” again, helping produce much-needed growth and jobs, he said.
With fragile growth of just 1.1 percent and a stubbornly high unemployment rate of 12.2 percent, the eurozone is badly in search of a confidence boost.
Make Europe a strong continent
Ahead of the summit, Merkel pledged her commitment to strengthen Europe, alongside France.
“Together, we want to push Europe forward and make it a strong continent in the world,” said Merkel late Wednesday after a meeting with French President Francois Hollande in Paris.
To do so, she signalled she would press through change as necessary.
“We have a situation in Europe where Germany is often accused of resisting certain developments. This is not the case,” she told the Bundestag lower house of parliament Wednesday.
“We are among those who say that we must, if treaties are no longer sufficient, develop those treaties… Those who want more Europe must be ready for new rules on some competencies.”
Key among reforms championed by Germany is getting the EU to work toward more centralised financial and economic governance, where members can be compelled to meet certain fiscal targets, even if this requires changes to EU treaties.
Hollande has rejected changing EU treaties, pushing for more pro-growth policies and less austerity within the existing European charters.
Beyond economics matters, the summit, which is nominally dedicated to defence issues, is also expected to look at the EU-Russia tug-of-war over Ukraine.
Tens of thousands of Ukrainians have descended on the streets for a month to protest Kiev’s decision to ditch a trade deal with the bloc, turning instead to Russia to rescue its economy.
EU sources said the leaders were expected to issue a message of empathy with the people of Ukraine while reiterating the 28-nation bloc’s readiness to sign a partnership with the former Soviet state once it feels ready.
The summit will also have to take on board the crisis in Syria and the Central African Republic.