The big news out of Europe yesterday was a rush to plan B: Greece's exit from the eurozone. Investors were betting on it with their money and European politicians were preparing for it with their contingency plans. But today, almost in unison, the markets and the politicians are swinging the pendulum in the other direction.
The European Central Bank. Eager to dismiss reports that the EU was expecting Greece's exit, Joerg Asmussen, member of the Executive Board of the European Central Bank tried to squash rumors Thursday in a CNBC interview. "It's our strong preference that Greece stays in the euro zone…. We are working on plan A," he said. "I always work on plan A. I am not speculating, I am working to make plan A successful." He repeated those claims during a conference in Poland the same day.
EU Leaders. In a joint statement responding to reports about widespread contingency plans, the heads of state of the EU meeting in Brussels issued a statement saying ''We expect that after the elections, the new Greek government will make that choice." In a separate statement today, Italy's Mario Moni added a particularly influential statement saying he thought Greece would ultimately stay in the eurozone.
Investors. It's possible that the downplaying of a Greek exit had an effect on global markets because in the late afternoon, stocks popped higher amid speculation. The Dow rose 5.8 points this afternoon bouncing back from a 0.6 percent decline. It doesn't appear that the political situation in Greece affected the markets, given that Greece's leftist Syriza party, which opposes austerity measures, kept its four-point lead over the conservative New Democracy party. Kaitlyn Kiernan at Dow Jones chalks the market rise up to statements from world leaders. "European markets finished broadly higher as leaders stressed Greece should remain in the euro zone, but didn't come to any new agreements on how to contain the debt crisis," reports Kaitlyn Kiernan at Dow Jones. Bruce Bittles, chief investment strategist at Robert Baird said it's too soon to start counting Greece out. "They don't vote until the middle of next month, and in the meantime we are going to see a lot of uncertainty and rumors going around that move the markets," he said. "There is a lot of pessimism out there." Indeed.