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No Quiet on the Western Front

The eurozone lived to fight another day. But a new battle is brewing.

Is there light at the end of the Chunnel? Five years after the global financial crisis kicked off, the eurozone is finally starting to regain its economic footing. Budgets are being balanced, growth is returning, and questions about countries leaving the currency union have ebbed. Yet despite a positive outlook for the short term, the eurozone still hasn't resolved the issues that cloud its future as an economic bloc.

The eurozone arguably turned the corner in July 2012, when Mario Draghi, the president of the European Central Bank, pledged "to do whatever it takes to preserve the euro." Not only would the bank keep short-term interest rates low, but it would also bolster the finances of member countries by buying their bonds and thus reducing the interest they paid on their debts.

The markets took Draghi at his word, and confidence in the euro and the eurozone began to strengthen. Meanwhile, Spain cleaned up its banks and launched a reform of its public sector; Portugal survived the worst of its austerity program; and Ireland became the poster child for fiscal and financial turnaround. Even Italy showed signs of exiting its two-year recession, provided it could achieve a measure of political stability.

Indeed, for much of 2013, the eurozone seemed well on its way to recovery. Its overall recession ended over the summer, and at the time of this writing, the euro's trade-weighted value had risen more than 8 percent since Draghi's speech. Only Greece has continued to limp along, barely satisfying the terms of its existing bailout and possibly heading for another one.

Still, it's hard to find anyone these days who thinks Greece or any other country will leave the eurozone soon. Draghi's October visit to the United States was something of a victory lap; at a speech in New York he said, "[The] euro area has a strategy to return to sustainable growth and employment, and that strategy is actually being executed." All policymakers need to do, he said, is to "stay the course."

In the short term, he might be right. Budget deficits, which averaged 6.5 percent of GDP in 2009, are now at 3.7 percent. Public debts have risen substantially, but they are still controllable in non-bailout countries. And the International Monetary Fund expects GDP to grow in every eurozone country except Cyprus and Slovenia next year.

The medium term, however, is a different story. High unemployment in the eurozone and the European Union as a whole has inflicted damage that may take many years to repair. The labor force in a country doesn't always bounce back when economic growth returns. People who have been jobless for years may be too discouraged to look for work again. The return of growth may be accompanied by demands for higher wages among the employed, narrowing the scope for new hiring. And the skills of the unemployed may have become obsolete during their long spells of joblessness. As Draghi and others have suggested, young people may be at a particular disadvantage in such a difficult labor market. They have little or no experience, and their education may not have given them the skills employers are seeking.

Even if the eurozone survives these dark portents, there is no guarantee that the problems of the past several years won't recur. This is because the fundamental problem with the euro has not been solved: A single monetary policy is still not appropriate for all the countries that use the currency, and it may never be.

This is mainly because the economic cycles of the members have failed to synchronize. Although the variance in growth rates among eurozone members came down in the previous decade, since the global financial crisis it has returned to pre-euro levels.

Enhanced trade was supposed to aid synchronization, but the eurozone's members haven't performed any better than the three other EU countries -- Britain, Denmark, and Sweden -- that opted not to join the currency union. Since 2001, when there were 12 EU countries in the eurozone, the two groups' exports within the EU have, on average, grown at about the same rate.

The euro may have aided economic integration in other ways, but by these two primary measures, its effect has been negligible.

If economic cycles in the eurozone fail to synchronize, its downturns and recessions will continue to be unduly deep. The reason is simple: Countries that use the euro can't unilaterally devalue their currencies in a bid to attract investment and boost exports. As a result, the return to growth and job creation takes longer. Making matters worse, the European Union's new, stricter fiscal rules -- designed in part to protect the euro -- will make it harder for countries to stimulate their economies with government spending.

Unfortunately, synchronization is where the long-term outlook for the eurozone is the blackest. In terms of future economic development, its members are diverging. Some boast entrepreneurial environments for business that are ripe with innovation, while others continue to struggle with bureaucracy and corruption. Some have relatively young populations and manageable debts, while others are aging fast and staggering under the burden of existing borrowing and pension liabilities. It does not help that these differences largely follow geographical lines.

Given these fundamentals, the economies of the eurozone countries will not fall magically into lock step merely because they share a single currency. If workers could move easily among them, there might be some hope. People would flee weak economies and flock to strong ones, helping to balance wages and unemployment across the eurozone. But even with nominally free migration within the European Union, barriers including licensing, languages, and prejudice still exist. And with anti-immigrant sentiment having risen in tandem with unemployment in some countries, the potential saving grace of the eurozone is also one of its most controversial attributes.

The recent crises among EU members had diverse causes, from bank failures to low tax collections. Taken as a whole, however, the crises served as a late alarm bell from a system that was broken from the beginning. It's still a long way from being fixed.

Image: Dan Kitwood/Getty Images

Feature

The Design and Fall of Civilizations

The technology uncovering humanity's past -- and perhaps its future.

Archaeologists discovered the Maya city of Caracol, hidden in the jungles of Belize, in the 1930s. In the 1980s, the husband-and-wife team of Arlen and Diane Chase began the daunting project of mapping Caracol and its environs. With teams of assistants and students, they tramped through the rain forest, recording and measuring every archaeological feature they could find. By 2009, after 25 years of labor, they had some of the most detailed maps ever made of a Maya city.

Then they tried a new mapping tool: "light detection and ranging" technology, or lidar. Although lidar had been used for years to survey large-scale features for projects such as urban planning and planetary exploration, only recently had it gained the resolution necessary for archaeological mapping. The Chases joined forces with NASA and the National Center for Airborne Laser Mapping at the University of Houston, which supplied a plane retrofitted to carry a million-dollar lidar machine that flew five missions over Caracol and its environs, mapping the ground with lasers.

When the images came back, the Chases were stunned. The lidar maps showed that in the quarter-century they had spent roaming the rain-forest floor, they had found only about 10 percent of what was actually there. The new maps revealed tens of thousands of previously unknown features, large and small-structures, houses, roads, reservoirs, terracing, sinkholes, caves (some with burials and artifacts), and even open and looted tombs. In a little more than nine hours, the lidar mission had revealed that Caracol was a far larger area than previously imagined, an urban landscape covering 200 square kilometers.

The Chases declared lidar the greatest archaeological advance since carbon-14 dating, which won its discoverer a Nobel Prize and transformed the science of archaeology. It's true that archaeology is on the verge of another revolution because of lidar. The technology will soon strip away the world's jungles to reveal their lost civilizations and hidden treasures, a prospect recently demonstrated in dramatic fashion by Bill Benenson and Steve Elkins.

A few years ago, the two filmmakers had the crazy idea of mapping a large swath of unknown rain forest in the rugged interior mountains of Mosquitia, a region in Honduras. These mountains have the distinction of being among the last archaeologically unexplored regions on Earth, cut off by dense jungles, malarial swamps, roaring torrents, steep ravines, deadly snakes, and the even more formidable Honduran bureaucracy.

Benenson and Elkins were looking for a legendary lost city, known as La Ciudad Blanca (the White City), long rumored to be hidden in the area. They persuaded the National Center for Airborne Laser Mapping to undertake the speculative project, the first to use lidar for pure exploration. (Previously, it had only been used to survey known sites.) And in May 2012, they spent a number of days flying over the Mosquitia mountains, logging a little more than eight hours of actual mapping time.

I accompanied Benenson, Elkins, and their team to Honduras as a journalist -- a trip I later wrote about for the New Yorker -- even though I believed their chances of finding something were small. Nothing much happened in the first few days, as the plane gathered raw data. But on the morning of the fourth day, the chief mapping engineer had crunched enough data to create maps of an isolated valley in the targeted area. Previously a skeptic, he burst out of his bungalow, running like a madman, waving his arms and yelling, "There's something in the valley!"

When we crowded into his room, we could see that the maps were covered with blurry, unnatural features that even to our inexpert eyes looked like ruins. Later analysis by archaeologists specializing in Mesoamerica revealed two, possibly three, unknown cities in those images, encompassing pyramids, plazas, roads, canals, terracing, rectangular mounds, and walls. This wasn't just a solitary city; it was a society. The prehistoric inhabitants of the Mosquitia rain forest -- they do not have a name yet -- had cleared the vegetation to create open areas, monumental architecture, roads, canals, dense housing settlements, and intensive agriculture. In a few hours, lidar had mapped an area that would have taken perhaps a century or more to survey using traditional methods, and in far greater detail.

Lidar doesn't just do faster and better what traditional archaeology can. By mapping hundreds of square kilometers in one fell swoop -- impossible in a ground survey -- it reveals how ancient civilizations organized themselves on the largest scales, how the hinterlands were connected to the cities, how the cities were connected to each other, and how people farmed, traded, and engaged in religious activity. All without turning over a spade of earth.

The use of lidar as an archaeological tool comes at a crucial time for the field. Over the past two decades, archaeologists have realized that most of their ideas about prehistoric settlement in the rain forests of the Americas were wrong. These jungles are not virgin: Prior to European contact, they were heavily cleared and the terrain extensively altered. Nor were these areas populated with scattered hunter-gatherer tribes, as we see today, but with advanced, sophisticated farming civilizations. The old idea that rain-forest soils are nutrient-poor and unable to support large-scale farming is now known to be false.

Given that, outside of Caracol and Mosquitia, the rain forests of Central and South America are untouched by lidar, I would expect surprising, if not mind-blowing, discoveries as other archaeologists begin their own swoops over the jungle canopy.

And this won't just happen in the Americas. The very first archaeological use of lidar in the Asian tropics led to the discovery of an ancient Khmer city hidden in the Cambodian jungle and revealed canals, roads, dikes, a score of unknown temples, a cave full of ancient carvings, and hundreds of mysterious mounds that may be ancient tombs. Not long ago, I met a young anthropologist at the School for Advanced Research in Santa Fe, New Mexico, who mentioned that she had started using lidar to map Penobscot Indian sites in Maine. I asked her what she thought of it as a tool. "Oh my God," she said, "lidar is crack."

Why does this all matter to the rest of us? Understanding how ancient civilizations organized themselves and why they collapsed is crucial to understanding many of the challenges we face today. The inhabitants of Mosquitia experienced a decline around the 13th century, a few hundred years after their more famous neighbor -- the Maya -- utterly collapsed, never to rise again. Long a mystery, the Maya collapse now appears to have been caused by environmental degradation and the growth of a wealthy class that hogged an ever-larger share of a dwindling pool of resources. Does this sound familiar? The story of archaeology is thick with cautionary tales that speak directly to the 21st century: from the demise of the Roman Empire (corruption, tax evasion, and military overspending) to the 12th-century fall of the Anasazi in the U.S. Southwest (clear-cutting, overfarming, and overreaching by the priestly class).

Civilizations change; problems endure. Our foreign-policy establishment would do well to heed the sometimes chilling lessons of the ancients.

Images courtesy of UTL Scientific