The EU looks set to end a difficult year on a high note, clearing bailout funds for Greece on Thursday to tame the debt crisis at its heart after agreeing a key bank oversight deal to bolster the union. EU leaders meet after their finance ministers thrashed out a complex bank supervision deal in marathon talks overnight, a key step towards a banking union which they hope will ring fence banks in trouble to prevent future crises. The 17 eurozone finance ministers meanwhile turn to Greece early on Thursday to review a debt buy-back scheme and see if Athens has done enough for them to finally release long-delayed bailout funds needed to avert a Greek debt default. German Chancellor Angela Merkel said on Thursday that she hoped the Greek funding would be released after the buy-back, designed to cut Greece\'s overall debt by about 20 billion euros ($26 billion) and put it on a sustainable basis. If as expected Greece gets the go-ahead, EU leaders can go into their summit later in the day in the hope they have made real progress in resolving a debt crisis which has brought the economy to its knees after three gruelling years. One new cloud however, is political instability in Italy where caretaker Prime Minister Mario Monti, credited with turning his country away from possible crisis with a programme of deep structural economic reforms, has replied to a challenge from former premier Silvio Berlusconi by saying that he will resign soon. The new supervisory scheme approved in the early hours on Thursday will allow eurozone banks to be recapitalised directly, rather than through governments, so as to avoid adding to their growing debt burden. The European Central Bank (ECB) will manage the eurozone system in tandem with the London-based European Banking Authority, which covers all 27 EU states, and national supervisors. The \"overall aim is to restore confidence in the banking sector,\" said the meeting\'s chair, Cypriot Finance Minister Vassos Shiarly, describing the accord as a \"Christmas present for the whole of Europe.\" From March 2014, banks with assets worth more than 30 billion euros or equal to 20 percent of a state\'s economic output will come under the ECB remit. The ECB will also have to right to intervene in cases involving smaller banks but it is expected that national supervisors will have the main responsibility in this category. Merkel, who had stressed the need for a measured approach starting off with only the major banks, said the deal was a major step in the right direction. \"It cannot be valued highly enough that eurozone finance ministers agreed overnight on a legal framework and the outlines of a common supervisory mechanism for banks,\" Merkel told German lawmakers. EU Financial Markets Commissioner Michel Barnier said the deal was a \"first stage\" that over the course of 2013 be followed by proposals for a fund to wind up banks that cannot be fixed and also a cross-border deposit guarantee system. The ECB would directly supervise some 200 of the biggest of the estimated 6,000 eurozone lenders under the scheme, he said. Britain, which with Sweden will not be joining the new system, wanted changes to voting rights so as to protect its position in the EBA and the interests of the City of London global financial centre. British Chancellor of the Exchequer George Osborne said the accord was \"a good outcome for the entire European Union ... the countries that weren\'t going to join the banking union, like Britain, were protected.\" The new Single Supervisory Mechanism (SSM) will ultimately allow the European Stability Mechanism (ESM), the eurozone\'s new defence fund, to recapitalise struggling banks directly so as to prevent the crisis spreading. Ireland had to seek an EU-IMF bailout last year when it found it did not have enough funds on its own to save its failing banks and Spain got help this year to prop up its stricken banking sector but this also increased their debt. \"We will come out of this together and stronger,\" said European Council President and summit chair Herman Van Rompuy, who earlier in the week was in Oslo for the award of the Nobel Peace Prize to the EU.