Bugging row threatens to re-open divisions on EU data protection

Claims that the US spied on German chancellor Angela Merkel dominated yesterday's summit of EU leaders in Brussels, reopening divisions among member states about the scope of European data protection laws.

The allegation on the eve of the summit that the chancellor's phone was tapped provoked a strong reaction from Germany and France, with Dr Merkel insisting "spying among friends" was not acceptable.

"We need to ask what we need, which data security agreements we need, what transparency we need between the United States of America and Europe, " she said on her way into the summit, in her first public comments on the subject.

Negative effect
A number of member states, including the UK, are concerned that some elements of a proposed EU data protection directive could have a negative effect on business.

“We have concerns that some of the proposals would seriously undermine the benefits of the digital economy we are trying to promote,” one UK official said, adding that small businesses in particular could be faced with fresh administrative burdens.

The EU is currently revising its 1995 data protection laws, in an attempt to reflect the changing nature of internet usage. While a revision of the legislation has been in the pipeline for more than two years, the Prism scandal gave new impetus to the move, amid widespread European outrage at revelations of US surveillance in Europe.

Earlier this week, the European Parliament's committee for civil liberties and justice approved a revised directive, which would fine companies up to € 100 million for breaching data protection rules. The new legislation also includes a "right to erasure" clause that would limit internet companies' access to users'private data. Although the legislation would affect the world's largest internet companies, such as Google, Facebook and Yahoo, it would also have ramifications for small businesses.

Despite the European Parliament vote this week, the legislation still needs to be signed off by all 28 EU member states. While France is strongly in favour of more protection for consumers and internet users, the UK is opposed to over-stringent measures that it estimates could cost British businesses £360 million a year.

There has been widespread lobbying of law-makers in Brussels by technology companies over recent months as the legislation passes through the various stages of the EU decision- making process.

Banking union
Meanwhile, EU leaders also attempted to advance the euro zone's banking union project last night, amid German resistance to key elements of the proposal. ECB president Mario Draghi updated leaders last night on the central bank's plans for next year's stress tests for euro zone banks.

Today, leaders will discuss migration in the wake of the Italian boat tragedies earlier this month, which claimed the lives of up to 550 people. In Brussels yesterday, European Parliament president Martin Schulz said an improvement in EU asylum regulations was vital, including improving reception conditions for asylum-seekers. Proposals for the regulation of legal immigration which are already in the legislative pipeline, should also be adopted without delay, he said.