The acceleration of the European debt crisis is pushing the world economy to the verge of danger. The sovereign credit ratings of Portugal, Belgium and Hungary have successively been downgraded, Italy's three-year government bond yields exceeded the unsustainable level of 8 percent again, and the costs of the five-year sovereign credit-default swaps have continued to set new highs.

Particularly, the auctions of seemingly risk-free German government bonds have almost failed. The European debt crisis is likely to be uncontrollable, so countries around the world have begun building safety nets.

The global financial market has always adhered to three principles: sovereign debt is a risk-free asset and can be considered a benchmark for evaluating prices of other financial assets; sovereign credit-default swaps are the reassurance of potential default risks related to government bonds; central banks have acted as an ultimate protector and a lender of last resort.

However, sovereign debt has become the target of short selling and sell-offs, so the "safe assets" are no longer immune and the costs of sovereign credit-default swaps have been on the rise. Central banks can hardly offer sufficient liquidity. The three principles, which once were considered "iron laws" of the global financial market, have been betrayed amid the European debt crisis, marking that global financial asset pricing has entered into an era of disorder, panic and confusion.

In order to cope with the exchange rate fluctuations, capital flight and asset losses that may be caused by the deepening European debt crisis, the central banks in many countries, including emerging economies, are investing heavily in gold, leading to a surge in global gold demand in the third quarter of the year.

According to a quarterly report recently released by the World Gold Council, central banks' net purchases of gold rose to 148.4 tons in the third quarter, more than doubling the 66.5 tons bought in the second quarter and surpassing that of the same period of any year since the collapse of the Bretton Woods system.

In addition to governments, banks and other financial institutions worldwide are also actively preparing for the possible spillover effects from the European debt crisis. In order to prevent the too-big-to-fail systemic problem from happening again, the United States recently launched a new round of stringent stress tests on the country��s top banks, such as the Bank of America, Goldman Sachs, Citigroup, JPMorgan Chase and Morgan Stanley.

Even CLS Bank International, the backbone of the foreign exchange market, which connects central banks and world-renowned financial institutions, is running stress tests to prepare itself for a possible break-up of the euro zone and to better cope with the impact of the break-up of the foreign exchange market.

At a time when established rules are broken again and again, investors find it hard to trust short-term commitments, and a trust crisis after temporary good news can make the market even more chaotic.

Overall, the destiny of the euro remains unclear. Countries with a relatively vulnerable financial system should accelerate building a financial firewall, strengthen the monitoring and management of cross-border capital flows and improve their ability to manage and control financial risks, so as to cope with the urgent systematic risk caused by the deteriorating European debt crisis.