NICOSIA – Cyprus’s central bank governor came under fire by the island’s ruling Communists this week after calling for a rethink of a wage indexation system he said fueled inflation. ECB member Athanasios Orphanides ruffled feathers at home by calling for a review of the system, used to adjust salaries twice a year. The practice, he said, risked stoking inflationary effects and could dent the competitiveness of the island’s economy. Communist AKEL, which won presidential elections in February with grassroots support from labor unions, said the US-trained economist was out of touch with public sentiment. «He is the governor of the central bank of Cyprus, not Zimbabwe. You have to have your finger on the pulse of the public,» AKEL MP Stavros Evagorou said on Monday. Cyprus’s EU-harmonized inflation was running at 4.4 percent in March versus the eurozone average of 3.6 percent. Wage indexation, known as CoLA, is fiercely defended by labor unions. Advocates say it has been instrumental in maintaining industrial peace in Cyprus. »This is a blessing,» Evagorou told the Cyprus Broadcasting Corporation. Another party member implied over the weekend that Orphanides’s powers may need to be reviewed, though AKEL subsequently said the comment was misinterpreted. «There is no thought of such an issue at present… the government respects and defends the system,» spokesman Stefanos Stefanou told journalists. Orphanides left a senior position at the US Federal Reserve last year to take the helm at the central bank of Cyprus. AKEL is a reformed Communist party which says it pursues a market economy, but occasionally takes potshots at «neo-liberals.» Orphanides has represented the Mediterranean island at the European Central Bank since Cyprus joined the eurozone on January 1. He is an independent state official on a five-year contract. Any suggestion to rein him in will raise eyebrows. «He cannot be controlled or muzzled. The only way he can be controlled is if Cyprus drops out of the eurozone and goes back to the pound. That won’t happen,» said Stelios Platis, an economist. Orphanides told a news conference last week Cyprus’s inflation problem was «acute.» Inflationary pressure was likely to remain in the economy because of CoLA, which he said contributed to second round inflationary effects. «Its a question of how to improve a practice so it can work better within the eurozone,» Orphanides said. The IMF and the European Commission have also suggested a CoLA rethink. The CoLA system is applicable in sectors which are highly unionized. According to unofficial estimates it covers some 85 percent of the work force. Economists argue that the broad-based system needs to be overhauled and more targeted to those in need. «It creates inflation by paying most to the higher earners, but doesn’t cover the people that really need it,» Platis said.