The finance ministers of the 27 EU nations pledged to enforce strict budget discipline and to impose sanctions on those who violate the budget deficit and debt limit enshrined in the Growth and Stability Pact.
They also agreed to react speedily and more efficiently in future and to scale down their existing debt mountains to restore market confidence.
The agreement at the first meeting of the new EU economic task force in Brussels comes at the end of a week which saw the euro plunging to a four-year low and massive sell-offs of global shares over new concerns that Europe's debt crisis could stifle the global economic recovery.
Investors were also worried about Europe's ability to contain the crisis and feared that other heavily indebted eurozone nations such as Portugal, Spain and Ireland would also be sucked into the debt spiral.
Earlier on Friday, the German Parliament approved the country's contribution of 148 billion euros to a 750 billion euro (nearly USD 1 trillion) EU-IMF rescue package for the financially troubled nations in the eurozone after a heated debate in the Bundestag, the Lower House.
The decision by the finance ministers came too late for the markets to react and all key European share indices continued to slide, while the euro recovered slightly and closed at 1.257 against the dollar.
In London, the FTSE closed lower by 0.2 per cent, the CAC 40 in Paris by 0.05 per cent and the DAX in Frankfurt by 0.66 per cent, while IBEX in Madrid edged up by 1.48 per cent.
German Finance Minister Wolfgang Schaeuble and his French colleague Christine Lagarde told a joint news conference after the meeting of the EU taskforce that they agreed to tighten the Growth and Stability Pact with measures including political and financial sanctions and closer coordination.
"We want to give some muscles" to the pact and there are no plans to amend the Lisbon Treaty on European integration, Lagarde said.