The US stock market sighed relief and hit new highs on this good news from Europe: the European Central Bank (ECB) will be allowed to buy an unlimited amount of debt issued by Europe’s cash-strapped governments.

This means the ECB is to become the “buyer of last resort” for government bonds, similar to the role played by the Federal Reserve here in the US.

The result is likely to be lower borrowing costs for Italy, Spain and perhaps Greece. Just as important, this should help restore investor confidence in the European markets.

But the ECB’s bond-buying program is not a license to print money, as the Germans have long feared. Attached to it are the following restrictions:

(1) All ECB bond purchases will be “sterilized.” This means that for each euro the ECB spends to purchase bonds, another euro will be withdrawn from circulation elsewhere in the financial system. And this is a big difference with our Federal Reserve, whose bond-buying activities have provided billions of dollars of liquidity for the US economy. The tit-for-tat approach used by the ECB should keep the European money supply fairly static, reducing the risk of inflation and largely appeasing Berlin.

(2) Public debt levels will be capped. Governments benefiting from the bond-buying program must agree to cap their public debt as a percentage of gross domestic product (GDP). So austerity isn’t off the table, and Greece will have to continue meeting its debt-reduction targets.

Frankly, this is about the most responsible way that the ECB could resolve the lack of confidence in European governments, at least in a monetary sense. But fiscally, this new program does nothing to address the underlying causes of the debt crisis, and it might lead to an economic slowdown due to the austerity requirements.

Still, the ECB’s intervention (focused on bonds with one- to three-year durations) will give Italy, Spain and other troubled countries the breathing room they need to find solutions, even though it’s not a solution itself. It will also help restore investor confidence, shifting the major headwinds we’ve all been struggling against for the better part of three years now.