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 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.
EU leaders have been under incredible pressure to get the two-year-old debt crisis under control, following a number of delays and lackluster solutions.
The slow pace of progress has taken its toll on financial markets, stoking fears among investors that the crisis could lead to a recession across much of the developed world.
Financial leaders the world over have been watching the EU negotiations with concern. Outside the summit, British Prime Minister David Cameron reassured reporters on Tuesday that "good progress" was being made toward dealing with the situation.
In Ottawa, Bank of Canada Governor Mark Carney said Wednesday he expects the EU will move incrementally toward ending the debt crisis.
"We are confident that the European authorities understand the severity of the situation," he told reporters. "We're also confident they understand the type of measures that need to be put in place."
However, Carney added that he does not expect that "the decisions of this week or next week or the following month in Europe are going to instantly solve all of the problems of the monetary union."
For now, he said the BoC is concerned about whether European leaders will be able to contain the situation if it worsens, or whether debt problems could spread to North America and other parts of the globe.
With files from The Associated Press
