Introduction The Euro-zone refers to the “monetary and economic union” (Jovanovic 23) that is made up seventeen European countries. The union was formed to facilitate faster economic growth and to ensure economic stability among the member countries. Due to the dynamics of the political and economic environment in the region, the Euro-zone is currently facing governance challenges. It is against this backdrop that the leadership of the union is considering reform plans. This paper analyzes the proposed reforms and their impacts in the zone. The Proposed Reforms Peer Review of Budgets and Penalty Proposal Following the effects of the recent economic crisis, most governments in the Euro-zone had huge budget deficits. Thus the leadership of the Euro-zone decided to put in place a mechanism for supervising the expenditure of its member states. In order to achieve this objective, the leadership proposed that the budgets of each state will be peer reviewed by other members of the union (Filippaki, Mamatzaki and Staikouras 18). Under this proposal, the members will be expected to present their budgets to the commission for review. This will be done six months prior to the presentation of the budgets to the local parliaments for approval. During the presentation, the member states will be expected to disclose their inflation rate, revenues, estimated growth and their expenditure. Countries that intend to run a deficit will have to explain to the EU the reasons as to why they have to do so. Besides, the countries that are not able to reach the “3% limit in the stability and growth pact will face sanctions (fines)” (Filippaki, Mamatzaki and Staikouras 19). Establishment of a Bailout Mechanism This proposal was meant to enable the Euro-zone to mobilize funds that can be lent to its heavily indebted members. Consequently, the member states and the IMF contributed a total of 22 billion Euros in support of the project (Filippaki, Mamatzaki and Staikouras 19). The proposal was also aimed at strengthening the governance in the zone. Thus recommendations were made to have the European Council adopted as the economic government in the European Union. Under this proposal, the European Council will be responsible for supervising the economic activities in the region. The council is expected to formulate rules and sanctions that will enable it to ensure economic stability in the region. A special organ known as the “European Financial Stability Facility (EFSF)” (Dickinson 56) will also be created. The EFSF will be based in Luxembourg and will be responsible for issuing securities (bonds) that will be backed by guarantors from member states in various capital markets. Establishment of European Monetary Fund (EMF) This proposal was meant to help the region to achieve a stronger fiscal union. The EMF will be responsible for identifying unforeseen economic crisis that might have serious negative effects in the region. This will help in maintaining stability in the region (Dickinson 45). A European Public Prosecutor (EPP) will also be established to handle legal issues in the region. Besides, a well established management organ will be formed to replace the Euro Group. The Prudent Fiscal and Policy making proposal (PFPM) The PFPM is a new principle for monito