The week: Why Nations Fail in football and elections

So let's look at Bulgarian football through the prism of Nobel prize-theory. First, Acemogly, Johnson and Robinson (known as AJR) argue that geography, culture, and ignorance are not the primary driving forces behind national prosperity or failure. These factors can influence outcomes but do not determine the success or failure of nations. Bulgarian football is a case in point here: similar nations, in similar circumstances, have achieved a vastly different outcome. Almost all of our neighbours are playing in the upper divisions of the League of Nations, have more competitive national championships, and their club teams reach further in the European championships. There is no other league on the Balkans in which the stadiums look like bombed-out shelters and even the newest one has trouble maintaining its grass cover.

While in all surrounding countries the mafia plays a role in football and corruption is present, none of them seems to have plumbed the mud bottom of Bulgarian youth academies, producing footballers who lack the rudimentary skills of today's game and using the clubs only as money-laundering machines. It's statistically impossible for a country of 6 million to not produce at least some really talented players. So something else must be broken.

The key, AJR says, is in the institutional make-up. It all hinges on whether the ruling institution is inclusive - encouraging participation, innovation, competitiveness, or extractive - concentrating power and wealth in the hands of a few, leading to stagnation and poverty. The Bulgarian Football Union is an extractive one. It's been ruled as a fiefdom by a single person for more than 15 years, enriching no one but a few around him, keeping the opposition at bay and closing its eyes to corruption, illegal betting and rule-breaking. Instead of aiming to level the field and work for the benefit of the wider football community and fans, it chose to concentrate everything in a small circle (and a single team) thus disregarding the whole idea of popular sport. Most of the professional clubs employ a large number of not-very-good foreigners, thus producing a dead-end cycle.

In AJR's theory, critical junctures are what decides the direction of a nation. In the case of Bulgarian football, such a juncture should have been the protest, engulfing Sofia a year ago, which ended the BFU dictatorship. Yet nothing substantial changed - the successor took over, no real changes were announced and things kept going. Until that night in Belfast, which reminded us yet again, that a failed nation (or institution) can't produce a break from the status quo.

Now apply the same to the upcoming (seventh in a row) elections.

1. Politics this week:

GERB's Ivan Portnih is accused of fraud and falsifying documents in order to "reconstruct" a port that never existed. It's, of course, not a case led by the Bulgarian prosecution (which wouldn't touch GERB with a bargepole), but by the European Public Prosecutor's Office (EPPO). The damage is worth more than 3 million euros and there is hardly a way for Portnih to plead innocent, since his leader Boyko Borissov is caught on tape saying "we'll build you a port" and the documents show there was no older structure there, says EPPO.

A comparison of two cases

There are obvious discrepancies in the way EPPO and the Bulgarian prosecution are going after alleged perpetrators of financial misdemeanors. EPPO did not see fit to get Portnih arrested, allowing him to give press conferences saying "this is political pressure". Meanwhile, MP Dzheihan Ibryamov, who was accused of taking a 100,000 bribe, was immediately arrested.

This comes as a reminder that the detention measure here is not imposed as a prevention, but as a punishment.

What's wrong with the Bulgarian air forces?

The crash of the L-39 ZA combat trainer aircraft on 13 September in the area of Graf Ignatievo Airbase was predominantly caused by the unjustifiably high risk taken by the two military pilots who died. This is the conclusion of the investigative commission of military experts, presented at a press conference this week.

According to the report, which has been endorsed by Defense Minister Atanas Zapryanov, the duo violated the safety measures and the order of execution of the complex acrobatics and had an incorrect assessment of the altitude margin.

This raises some questions. This is the third fatal accident in the Air Forces in as many years. There must be a reason why experienced pilots keep making mistakes like this. It probably has something to do with the flight time they have - just 50 hours per year, says the investigation. This is less than half what's needed for an elite pilot and it means the Bulgarian state is probably failing its best.

2. Economy:

In the last 6 months (April to September), the National Employment Agency (EA) has received a total of 39 notifications of mass dismissal of a total of 3306 employees. This is an increase compared to the same period of last year, when 2016 employees were fired en masse, a special report prepared by the EA for Capital weekly claims. The minimum wage increase is hitting low-wage sectors such as the textile industry. But it has also affected an area at the other end of the wage scale - the IT industry, where several international companies have decided to cease or significantly limit their operations in Bulgaria. Most of the redundancies - about 1,300 - are recorded in Pleven, where the automotive cable manufacturer Leoni is closing its plant.

The mortgage boom in Bulgaria will likely subside next year: OTP

The acceleration in mortgage lending in Bulgaria will calm down and the growth of portfolios will halve - from 24.6% in 2024 to 12.5% in 2025, according to the most likely scenario forecast by the Hungarian OTP bank, which owns the local DSK bank in Bulgaria. At first glance, the data does not seem to correspond with the bank's expectations that economic growth will accelerate from 2.3% in 2024 to 2.8% in 2025 and 3% in the following two years. OTP is also betting that real wage growth will continue to be strong - above 5% a year until 2027 - and also that the ECB will lower its interest rate to around 2%, suggesting that there is unlikely to be upward pressure on home loans.

Figures:

The pace of inflation in the country in September, according to National Statistics data. Compared to the previous month, there was a deflation of 1%. This is the lowest level since March 2021, when the indicator began to climb.

1 billion

More will go to the National Health system under the new budget (assuming anyone votes it in).

3. Business:

The revenue of the CV software company has almost tripled in the span of two years. In an interview with Capital weekly, the founders of the firm say they prefer to develop it at their own pace with their own funding, but do not close the door to potential external funding in the future.

M&A

The Bulgarian publicly traded tech holding announced a new deal at the end of last week - the purchase of 100% of the Serbian fintech Badin Soft. Badin Soft's founders will become shareholders in the Bulgarian company. The details of the deal remain undisclosed.

Renewables

The majority-Austrian firm launched its newest investment in Bulgaria - the 113 MW Tsenovo Solar Plant in the Svishtov region in Northern Bulgaria, which has become one of the eight largest solar parks in the country.

4. Energy:

The state-owned mining company increased its loss due to reduced work and a drop in coal sales. For the period between the beginning of the year to the end of June, the company made 116 million levs in revenues from operations (compared to 242 million levs for the same period last year) and a loss of 75.9 million levs, compared to 51.4 million levs last year. This is clear from the company's report for the second quarter of 2024.

Put another way, for every 1.5 levs of revenue, the company generated 1 lev of loss. This signals that without state aid or reforms the company cannot continue to exist much longer. Moreover, the personnel costs are more than the total revenues of the company. In the first half of the year, 149.5 million levs was spent on salaries - 33 million levs less than the revenue.

5. Brussels:

#Migration- EU heads of state met in Brussels to forge agreements on issues where consensus has proved difficult. Migration is one of the hot potatoes on the agenda after Germany introduced border controls and Poland announced plans to tighten asylum rules to curb illegal immigration. Among other things, they discuss how to strengthen economic competitiveness and growth in the face of increasing competition from China and the USA. Ukrainian President Volodymyr Zelenskiy also revealed his "victory plan" in person in the colorful room of the Council.

#Farmers- The European Commission has approved two Bulgarian state aid schemes of approximately €84 million (BGN 164 million) to support grain and oilseed producers and approximately €84.9 million (BGN 166 million) to support farmers in the context of the war Russia vs Ukraine..

6. Watch out for:

Despite the severe competition from other candidates and the mounting scandals associated with him, the current director of the National Radio (BNR) won a second mandate after a decision taken by the majority of the Council on Electronic Media (SEM), which has been appointed by the president and the parliament. According to the opponents of Mitev's appointment, SEM members Prolet Velkova and Simona Veleva, he should not have been allowed to stay in the post because of his decision to allow former radio host Petar Volgin to use the BNR airwaves to run his European Parliament campaign.

Date:

The Urban Wine Fest in Sofia will entertain lovers of wine, culture and cuisine. During the weekend, they can taste more than 40 types of wine from more than 17 local varieties. In addition, there is a music program and wine-appropriate food. Those wishing to sample a variety of wines can bring their own tasting glass or rent one. The event takes place in the Largo near Serdika station, from 4 to 10 pm. Admission is free, and consumption is payable at the door.

Place:

Is a village in Macedonia, where the current railway towards Bulgaria ends. The remaining 23 kilometers are an engineering challenge with tens of bridges and tunnels. The new Macedonian government recently announced it is giving up on Corridor N8 - the name under which the rail connecting the Black and the Adriatic seas is known. Yet this week it turned out that Skopje and Sofia agreed to keep working on the project and get another 88 million euro from the European Commission on completing the rail connection. The EU will grant 230 million euro for the prioect, 510 are grant from the European Investment Bank and the European Development Bank.

Institution:

European American Investment Bank

The Austrian bank, in which a shareholder is also the Bulgarian banker Tsvetelina Borislavova, was closed by a shareholder decision after the Financial authorities ordered it to raise more capital or shut down. The bank had troubles with the regulators, who didn't approve of its anti money laundering measures, and its shareholder structure. According to local media, the bank used to be mainly a service provider for wealthy individuals.