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European risk is over, says dealmaker Sternlicht

The European bond market is signaling that the continent's economy is "probably going to be OK," Starwood Capital chief Barry Sternlicht told CNBC on Wednesday.

"I've been watching the 10 year in Spain and Italy all year. As soon as [the yields] broke 4 [percent], it's kind of like a referendum that Europe is going to at least get through. At least the Euro risk is done," said Sternlicht, whose private equity group has $33 billion in assets under management and focuses heavily on real estate.

The bond yields are converging, he said in a "Squawk Box" interview. "So now you have the Spanish and Italian 10 years trading around where the U.S. 10 year [Treasury] is or getting close."

Read MoreInvestors were wrong on US bonds: Private equity pro

Sternlicht, who founded Starwood Hotels and the W hotel chain, is looking to take advantage of the brightening future he sees in Europe—buying more than 50 hotels in three portfolios in the U.K. "We're going to merge them together and probably take it public in a couple of years."

He said he's not alone believing in Europe's comeback. "You're seeing enormous investor interest in Europe—probably ahead of the fundamentals. But distressed guys—whether it's distressed credit, distressed equity guys—everybody is looking at Europe." Banks there are still unloading loans and properties, he added.

"The frontier countries right now are Spain and Italy," Sternlicht said. "Spain is really reforming themselves. It's amazing. So with Spain moving, Italy is looking over … and saying we've got to do something."

He also said he's dabbling in other areas of Europe—purchasing an office park in Eastern Europe, a retail company in Sweden and a deal with the Irish National Asset Management Agency. "We're [also] going to the fringes like Poland where you can get better yields."

—By CNBC's Matthew J. Belvedere.

Contact Europe: Economy

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