Markets are over their fears that the worst will happen in the world economy as investors hope that Europe will finally find some solution to the slow-motion debt crisis that has been unfolding for the past year and a half, Wilbur Ross, WL Ross chairman and CEO, told CNBC Friday.
European shares were trading higher on Friday despite a downgrade of Spain by the S&P rating agencylate on Thursday, and the euro was up against the dollar.
"I really do I think the markets now are building in at best a flat economy… markets never really discount the same thing twice," Ross said.
Investors have gotten used to European leaders' dithering when it comes to the debt crisis and are not pricing in any major catastrophe, he added.
"Greece has been bankrupt for quite a while and already had defaulted about five times in the last hundred years," Ross said.
"I think people got a lift out of the fact that Slovakia did approve the EFSF," he added. "There's also hope that the EU meeting over this coming weekend will have some positive effect… followed on the 3rd of November by the G20 summit."
Slovakia's parliament approved the expansion of the euro zone's rescue fund, the EFSF, on Thursday after it sparked accusations that it had used the European rescue issue to settle internal political disputes when it rejected it the first time.
Investors are hoping that the upcoming meetings of euro zone leaders will clarify how the EFSF will be used to end the crisis and how it will be supplemented, Ross said.
"As you know I've been feeling that [European leaders] are always a couple of pages behind. I don't think that the 440 billion euros ($606 billion) by itself is nearly enough," he said.
"I think you need a trillion or a trillion and a half firewall in order to be convincing to the markets that this thing can be played out without disasters to the markets," Ross added.