A miracle arrived in this muddy Balkan backwater a few months ago. It descended upon the hapless local soccer team, which suddenly became so flush with cash that it could import hotshot foreign players and hire a celebrity coach from Argentina on a $350,000 contract, plus hefty bonuses and expenses.

Desperately poor and scantily educated, people here did not ask how all this was possible in little Lushnje, a bleak concrete-block town about 30 miles south of Tirana, the capital. Strewn with trash, it is a place where horse-drawn carts outnumber cars and $60 a month is considered a living wage.

Rather, the people rejoiced in the team's vastly improved record and swapped rumors that the Argentine soccer legend Diego Maradona was on his way to Lushnje -- and might even bring the town the European championship.

It seemed much too good to be true -- and it was. Last month, the fortunes of the team's bankrolling owners collapsed, dealing a staggering blow not only to Lushnje's dreams of soccer glory, but also to the fragile economy and political stability of the poorest country in Europe.

The owners, the Xhaferri family, were one of nine major concerns in Albania believed to be running huge pyramid schemes. The schemes, offering "interest rates" of up to 100 percent a month, use the funds of new depositors to pay off old ones -- until new deposits dry up. When that happens -- as it has throughout Eastern Europe since the collapse of communist rule -- the funds collapse and people get hurt.

Badly hurt, in tiny Albania's case. After 50 years of being sealed off from the world by one of modern history's most tyrannical regimes, many Albanians tend to regard what they know of the free market with childlike naivete -- and grown-up greed.

"We didn't understand how these things worked, and no one asked," said Qazim Shabani, a town official in Lushnje. "No one here has ever been rich, and people wanted to be rich. It's natural."

By European standards, this country is not just poor, it's destitute. While much of Eastern Europe shed communist ideology and embraced free-market reforms in 1989, Albania's hard-line Stalinist leaders dug in their heels.

When they finally were toppled five years ago -- the last such government in Eastern Europe to go -- there were fewer than a dozen elevators in Tirana. There wasn't a single stoplight, but in a country with barely 5,500 vehicles hardly anyone noticed. Foreign investment did not exist. In the winter of 1991-92, the only thing that kept the country from starving to death was food aid from Italy, Albania's neighbor across the Adriatic Sea.

A new, less authoritarian government loosened the shackles, and suddenly Albania discovered an enormously valuable new export -- cheap labor. From a population of about 3.5 million, hundreds of thousands of people left to work in fields and sweatshops elsewhere in Europe, mainly Greece and Italy. Photographic images of hungry, wiry Albanians shinnying up the sides of freighters bound for Italy became an emblem of desperation in communism's wake.

The modest salaries they earned overseas were a fortune by Albanian standards, and the money they sent home fueled a commercial boomlet that began to transform the country, at least on the surface. The country also made handsome earnings as a conduit of oil and other goods to neighboring Yugoslavia, in contravention of the wartime embargo imposed by the United Nations, diplomats say.

With astonishing speed, kiosks, bars, cafes and restaurants mushroomed on the streets of every city. On the facades of low-rise apartment blocs, TV satellite dishes emerged between the lines of drying laundry. Several hundred thousand newly arrived cars and trucks have turned Tirana into a cacophony of novice drivers, congestion and accidents. Half the capital seems to be under construction, much of it to accommodate hundreds of thousands of new residents flocking to get a piece of the action.

The government of President Sali Berisha, a chain-smoking former heart surgeon, although largely ignorant of financial markets and widely regarded as corrupt, nonetheless did some good, diplomats and other foreign observers say. It cut inflation and managed to attract perhaps $200 million in private foreign investment -- a pittance by European standards but a help anyway. It also privatized agricultural land, giving a huge boost to food production.

But none of it made the majority of Albanians much wiser to the ways of capitalism. And when pyramid schemes began to appear in the last few years, nearly everyone caught the bug. Economists, professors, government officials, taxi drivers, soldiers -- it is difficult to find anyone in Albania who did not entrust his meager savings to one of the pyramid schemes, which are known here rather grandly as "foundations." Many people sold their homes and plowed the proceeds into the schemes. Estimates of the volume of deposits run from $300 million to $1 billion -- at least $500 for every family in the nation.

"I don't know how it's possible for them to pay these interest rates, but everyone was depositing money with them," said a 51-year-old shop owner in Tirana who, like many people here, declined to give her name. Assuming as most Albanians did that the schemes had the support of the government, she put her family's entire savings, about $5,900, into two of the funds and, like everyone else, reinvested the earnings. Now she doesn't know if she'll get her money back, let alone the promised interest.

"If I'd had some warning from the government at the beginning, I might have thought differently," she said. "But the government never said anything."

Gentian Balliu, 18, a fresh-faced conscript in a green tunic, put his family's savings, about $1,000, into a scheme that promised to triple his money in three months. His goal was to make enough to bribe his way onto a military base closer to home -- a common practice in Albania. "My parents' combined pension is less than $100 a month," he said. "If we lose this money, it would be a psychological catastrophe."

When the crash began two weeks ago, Albania was seized by the most destructive outbreak of violence since the old Stalinist regime collapsed in 1991. Two funds were frozen by the government; others declared bankruptcy or slashed their interest rates and stopped paying back principal. Crowds of angry, panicky depositors threw stones at government buildings and police. In Lushnje, the town hall was set afire with Molotov cocktails. Hundreds were arrested. Some critics of the government were badly beaten.

Stunned, the government arrested several of the schemes' operators and promised that at least some of the neediest depositors would gradually recover a portion of their money, beginning Wednesday.

Just who will receive money, and how much, is unclear. Diplomats and foreign economists here say the losses are far too great for the government to cover. They say that more than a year ago, the government -- which faced legislative and local elections in 1996 and was financially backed by at least some of the scheme operators -- ignored explicit warnings from both the International Monetary Fund and the Albanian Central Bank about the danger of the schemes.

Now, the foreign observers say, the government is dragging its feet on shutting down some of the other schemes, delaying an inevitable day of reckoning. "Knowing the scale of the problem, it's not difficult to understand why the government is reluctant" to move against the schemes, said an international observer in Tirana. "There isn't a painless way to get out of this."

Already, retail sales have fallen by about half in recent weeks as nervous consumers rein in spending. Greek television reported that the number of Albanians buying black-market visas to work in Greece has doubled. And here in Lushnje, the soccer miracle has collapsed.

Two members of the Xhaferri family, which ran the team and the pyramid scheme, are in prison. The celebrity coach, Mario Kempes, star of Argentine World Cup championship teams in 1978 and 1982, has gone home, having collected only a fraction of his gargantuan contract. So have two Brazilian players, both team stars.

In fact, soccer is not being played anymore here, or any place else in Albania for that matter. The government, apparently fearing that any large crowd these days could turn into a violent protest rally, has banned all sporting events.

The only vestige of Lushnje soccer's recent glory days is Leonardo Nosa Ineh, a 19-year-old Nigerian forward with dreadlocks, a soft smile and a big problem; he no longer has a team to play on.

"I didn't even know Albania played football, I didn't know anything about Albania," Ineh said forlornly, sitting on the bed of his tiny room in a crumbling tenement. "I was supposed to get another installment of my contract today, $10,000. Now there's no way." CAPTION: ALBANIA AT A GLANCE Albania, Europe's poorest country, emerged in 1992 from total isolation under Stalinist regimes, but living standards remain depressed. Population

3.3 million Per square mile 293 Religion Muslim

70% Orthodox

20% Roman Catholic 10% Economy Per-capita gross national product $1,100 Growth rate

-- 3.2% Standard of living Televisions

1 per 13 people Phones

1 per 70 Newspapers

50 per 1,000 Health Life

65 for males expectancy

71 for females Infant

31 per mortality rate 1,000 births Physicians

1 per 585 people CAPTION: Economists, professors, government officials, taxi drivers -- it is difficult to find anyone in Albania who did not entrust his meager savings to a pyramid scheme. Now, with the economy in turmoil, black-market money-changers, right, count out cash on a car's hood. CAPTION: Following the collapse of a number of Albanian pyramid schemes last week, scores of women lined up in Tirana to sell their blood for $24 a donation.