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The European Union has reached a deal that will see banks take a loss of 50 per cent on Greek bonds they have purchased -- an important step toward defusing the eurozone's debt crisis.

French President Nicolas Sarkozy hailed the agreement at a press conference early Thursday after a marathon emergency meeting of EU leaders in Brussels, The Associated Press reported.

"The result will relieve the whole world that was expecting a decision that was strong from the eurozone," French President Nicolas Sarkozy told reporters at news conference, according to the BBC.

The assembled leaders also agreed to force Europe's major banks to raise $148 billion in an effort to strengthen them ahead of the expected losses on Greece's debt, and made headway toward a third agreement that would boost a joint bailout fund to $1.4 trillion.

The larger bailout fund is supposed to help keep Greece's debt -- which is expected to hit 180 percent of its economic output -- from enveloping larger countries including Italy and Spain.