THE markets reacted with euphoria to the European Central Bank's new outright monetary transactions programme or OMT, the latest acronym to mark this crisis (remember all was supposed to be solved by the SMP, EFSF and ESM programmes?) My economics colleague analyses it here.

But we have seen in the past that the market reaction can quickly reverse. And the programme raises a number of questions.

1. Everyone knows that the Germans are the paymasters of Europe, and yet the Bundesbank opposed the programme. How credible can the ECB be in the long run if it is consistently opposed by the Bundesbank, the bank it was set up to replicate?

2. As my colleague notes, the key question will be whether the Spanish and the Italians are willing to ask for help, on the condition of austerity programmes. Unless they ask, the OMT won't kick in. But if the ECB's promise drives down yields in the short term, then the governments will be less inclined to ask for help. This might sound ideal, unless the Bundesbank is right and the ECB promise means the governments will simply postpone reform.

3. But let us suppose that governments do apply for the package and impose austerity. On the basis of the Greek experience that will mean prolonged recessions, and a weak euro-zone economy. In turn, that will lead to resentment against the ECB. How stable can this situation be, or will voters turn, as the Greeks almost did, to rejectionist parties?

4. The programme will be unlimited but also sterilised which means, according to JP Morgan that

The way the ECB has chosen to sterilize these reserves balances is to encourage banks to shift them from the fully liquid current accounts into fixed term deposits, which are just another form of reserves. The ECB could offer these at any maturity but has chosen a short maturity of just one week (likely for operational reasons). The deposits are auctioned through a tender procedure, which requires banks to put in bids, stating the amount they are willing to tie down for the one week period and the interest rate at which they are willing to do so

Now it is likely that banks have an unlimited appetite for holding money at the ECB so this won't be a problem. But it does mean that we have a pyramid-style system, in which banks are huge lenders to the ECB which in turn is a big buyer of the debt of governments which in turn are the backstop for the banks. It looks rather like the balance sheet of the Robert Maxwell empire.

5. The ECB will buy debt of short-term maturity, three years or less. The temptation will be for governments to issue debt in that range, since the cost will be cheaper. So the debt of those governments will gradually become more short-term. Say the debt-to-GDP ratio is 100% and the average maturity is three years; 33% of GDP needs to be refinanced every year. that's a lot and the country starts to look like a struggling business, living hand-to-mouth. Will the ECB actually be able to extricate itself from this programme? (The same question applies to the Bank of England and the Fed, of course)

6. And that also takes us back to moral hazard. In theory, the ECB will stop its bond-buying if governments veer off the agreed programme. But is that threat credible? After all, the ECB seems to have changed tack many times in order to stave off a euro crisis. If the euro is "irreversible" and if a cessation of ECB bond-buying threatened its existence, wouldn't the ECB blink again?