By Maria Golovnina
EDINBURGH (Reuters) - Scotland set up a historic independence referendum on Monday after its leader and Britain's prime minister finalized arrangements for a vote that could lead to the demise of its three-centuries-old union with England.
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 referendum agreement allows Scotland to ask its people in a 2014 vote whether their homeland should become an independent country or stay within the United Kingdom.
"It's a historic day for Scotland," a visibly excited Salmond said after signing the deal with Prime Minister David Cameron. "Do I think we can win this campaign? Yes, I do."
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.
Cameron, who did not address reporters alongside Salmond, opposes Scotland's push for independence but agrees it is up to its people to determine their future in a vote.
Many Scots are unconvinced. A Comres poll for ITV News found only 34 percent supported independence and 55 percent agreed that Scotland's economy would suffer as an independent country.
To convince doubters, Salmond is banking on his skill as an orator to tap into a centuries-old rivalry with England and show that independence would allow his country to pursue a more distinct left-leaning agenda than its southern neighbor.
He has also won a major concession from London to allow Scotland 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 favor of independence.
In Edinburgh, a vibrant city festooned with Scotland's blue-and-white flags, few people shared Salmond's excitement.
"I consider myself British and I prefer to stay British. I was in the British army fighting on the side of the English and the Welsh and the Northern Irish," said Murray Poole, 24.
"But some of my friends are up for it (independence), they don't like England ... They want to become Scottish."
FLAG AND IDENTITY
Back in London, the debate surrounding Scotland's fate has failed to capture people's attention at a time when many are concerned with deepening budget cuts and unemployment.
"Couldn't give a Scooby dooby doo," said a builder outside London's wool exchange. Jamie Smith, a young professional, said: "Scotland would be foolish to go it alone. They get more out of it than they put in."
Speaking to reporters after the signing, Cameron argued Britain would be stronger if it stayed together.
"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," said Cameron. "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.
Nationalists have timed the 2014 referendum to coincide with the 700th anniversary of the Battle of Bannockburn when Scottish forces led by Robert the Bruce defeated English invaders.
Now that the agreement has been signed, the Scottish government will bring forward legislation setting out the exact referendum date, who can vote, and the wording of the question, along with rules on campaign financing.
Salmond accepted London's key demand that there should be only one straightforward "in or out" question. He 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.
A former oil economist, he believes an independent Scotland would be prosperous because it would be entitled to the lion's share of North Sea oil revenues.
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 defense, at our place in the world, on all these big issues, people across Scotland will continue to support Scotland being in the United Kingdom."
(Additional reporting by Peter Schwartzstein and Isla Binnie in London; Editing by Andrew Osborn and Michael Roddy)