THE governor of the Central Bank yesterday came under heavy fire from the island’s ruling parties after calling for a rethink of a wage indexation system he said
fuelled inflation.
“HE IS confused as to what his role is, and acts as if he owns the Central Bank and is the super-president of the economy,” said AKEL’s parliamentary spokesman Nicos Katsourides, referring to the statements made last week about the Cost of Living Allowance (CoLA) by Central Bank Governor Athanasios Orphanides.
Orphanides had said that the CoLA indexation system stoked inflationary effects, which could dent the competitiveness of the Cypriot economy and contribute to inflation.
“His statements are unacceptable,” Katsourides continued.
“He is under the impression that he is above the president, the government, parliament, and everybody else.
“He should re-read the law which outlines his authorities and should not forget that laws are instituted so that they can be changed,” he said suggestively.
“CoLA is a successful institution which is welcomed by the totality of the working people.”
DISY’s Vice-Chairman Averoff Neophytou advocated a dialogue instead of attacking Orphanides.
“Opinions must not be anathematised. Both sides are correct since they are looking at the matter from different points of view,” he said.
“If CoLA is analysed according to strict economic criteria, it will be soon discovered that while CoLA is indeed a tool which protects the working people, it also helps reproduce inflation and stunts the productivity and competitiveness of the economy.
“A dialogue which would cover all the parameters of the topic would not be harmful, as long as there was no intention to harm workers,” Neophytou added.
Furthermore, he thought Katsourides and AKEL were out of line.
“No one has a right to silence or threaten to abolish or squash the existence or autonomy of the institution of the Governor of the Central Bank,” the DISY Vice-Chairman argued.
However, DISY Deputy Lefteris Christoforou was not in agreement with his party colleague.
“It is unacceptable that during financially hard times such as these, some want to tamper with CoLA”, he said, pointing to Orphanides as the culprit.
DIKO President and President of the House of Representatives Marios Karoyan described CoLA as, “a blessing which we will not allow to be tampered with”, while
EDEK leader Yiannakis Omirou said his party would not concur to a dialogue.
“Since CoLA is a conquest of the working people and a foundation which maintains societal balance, we will not accept a neo-liberal approach by any public figure who may call for CoLA to be either abolished or reformed.”
Orphanides is an MIT trained economist who left a senior position at the US Federal Reserve last year to take the helm at the Central Bank of Cyprus.
Government Spokesman Stephanos Stephanou was clear that the government stood fully behind CoLA.
“CoLA reinstates the purchasing power of people’s salaries and contributes to the existence of a viable living standard.
“During a time when nobody is saying that CoLA should be abolished, discussing the issue is not only unhelpful, but also upsets social and industrial relations.”
Probed by reporters yesterday to comment on Katsourides’ harsh words about Orphanides, Stephanou consistently refrained from making any comment.
But he dismissed a suggestion over the weekend that Orphanides’ powers may need to be reviewed. “There is no thought of such an issue at present… the
government respects and defends the system,” Stefanou said.
Labour Minister Sotiroulla Charalambous said yesterday Orphanides should have paid tribute to the achievements of CoLA.
“It is an institution which has helped the working people, contributing to industrial peace, and this is a fact which no one can forget when they make any comments on the topic.”
Orphanides was not available for comment yesterday, but 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 euro zone and goes back to the pound. That won’t happen,” said economist Stelios Platis.
The IMF and the European Commission have also suggested a CoLA rethink.
The system is applicable in sectors which are highly unionised. According to unofficial estimates it covers some 85 per cent of the workforce.
Economists argue that the broad-based system needs to be overhauled and more targetted 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.
