|Scotland gears up for 2014 breakaway vote||
Scotland's drive for sovereignty, led by its nationalist leader Alex Salmond, echoes separatist moves by other European regions such as Catalonia and Flanders which feel they could prosper as separate entities inside the European Union.
Signed in the Scottish capital Edinburgh, the deal will allow Scotland to decide in a 2014 referendum whether it should become an independent country or stay within the United Kingdom.
One of the most contentious issues at stake is the ownership of an estimated 20 billion barrels of recoverable oil and gas reserves beneath the UK-controlled part of the North Sea.
Britain is also worried about the future of its nuclear submarine fleet based in Scotland as Salmond says there would be no place for nuclear arms on Scotland's soil after independence. Moving the fleet elsewhere would be costly and time-consuming.
Many Scots are unconvinced about independence. Opinion polls show only between 30 and 40 percent of them are in favour - a range that has changed little as negotiations have intensified.
But Salmond is banking on his skill as an orator to tap into a centuries-old rivalry between Scotland and England to convince doubters that independence would allow his country to pursue a more distinct left-leaning agenda than its southern neighbour.
Salmond said it was a historic day and that the agreement paved the way for "a new partnership in these islands."
"The Scottish government has an ambitious vision for Scotland: a prosperous and
successful European country, reflecting Scottish values of fairness and opportunity, promoting equality and social cohesion," he told a news conference.
Prime Minister David Cameron opposes Scotland's push but London agrees it is up to Scotland to decide its future for itself in a vote.
"I passionately believe that Scotland would be better off in the United Kingdom but also crucially that the United Kingdom would be better off with Scotland," Cameron told reporters after the signing. "I will be arguing to keep the family together."
Scotland already has many of the trappings of an independent nation such as its own flag, legal system, sports teams, as well as a distinctive national identity.
But London argues that an independent Scotland - home to about five million people - would struggle to make ends meet as the bulk of is current funding comes from a 30-billion-pound ($48 billion) grant from the UK government.
"Independence is about Scotland leaving the UK, becoming a separate state, taking on all the burdens and risks that go with that and losing the benefits and opportunities that we have as part of the UK," UK Scottish Secretary Michael Moore told the BBC on the eve of Monday's signing.
"When we look at the economy, at defence, at our place in the world, on all these big issues, people across Scotland will continue to support Scotland being in the United Kingdom."
Scotland and England have shared a monarch since 1603 and have been ruled by one single parliament in London since 1707. In 1999, for the first time since then, a devolved Scottish parliament was opened following a referendum.
Nationalists have timed the 2014 vote to coincide with the 700th anniversary of the Battle of Bannockburn when Scottish forces led by Robert the Bruce defeated English invaders.
The Scottish government will now bring forward legislation setting out the exact referendum date, who can vote, and the wording of the question, along with rules on campaign financing.
Cameron and Salmond have been negotiating for months and the broad outlines of their agreement which allowed Monday's signing to go ahead have been widely trailed.
Cameron confirmed that Salmond had accepted London's demand that there should be only one straightforward "in or out" question.
Salmond had earlier campaigned for a second question, on whether Scotland should be given more powers in the so-called "devo max" form of enhanced devolution that stops short of independence.
For its part, London is thought to have agreed to allow Salmond to lower the voting age to 16 from Britain's countrywide 18 - a coup for Salmond who believes that young people are more likely to vote in favour of independence.
But for Salmond, convincing his people to support independence remains an uphill task given the tough economic times.
There are concerns over what would happen to Scotland's debt and over whether it would automatically become an EU member.
A former oil economist, Salmond argues an independent Scotland would be prosperous, entitled to the lion's share of North Sea oil revenues and should be able to borrow at rates no worse than London.
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