The European Union's executive body has decided to ax its investigation into the allegations that the U.S. spied on EU citizens, angering lawmakers in the bloc's Parliament who called for tougher actions against America's surveillance regime.
The European Commission's decision is a major blow for the European Parliament who have staged a series of inquiries into the snooping claims and called for the suspension of a controversial financial data-sharing agreement between the EU and the U.S. aimed at tracking terrorists' funds.
Members of European Parliament (MEPs) are outraged by the Commission's decision.
"Investigation? What investigation? It consisted of asking them asking the U.S., 'Hey did you take our data illegally?' That is not an investigation," Dutch MEP Sophia in 't Veld told CNBC in a phone interview from Brussels.
(Read more: US spying a 'slap in the face': EU lawmaker)
"Our citizens are being spied upon. Our communications are not safe. There is mass surveillance of EU citizens on EU territory. It is unacceptable that the Commission refuses to make full use of its powers and protect our rights. We will use any instrument we can to make our citizens get the protection they are entitled to."
But the European Commissioner for home affairs Cecilia Malmström said she was satisfied that the U.S. did not breach the rules of the data sharing agreement and decided to drop any investigation into surveillance activities.
"The consultations have not revealed any elements indicating a breach of the agreement by the U.S., therefore, I have decided to close them," Malmström said in a speech in Brussels on Wednesday.
The allegations revolve around reports that the National Security Agency (NSA) is monitoring personal money transfer information, including bank and credit card transactions of EU citizens.
(Read more: Europe and Brazil taking spying claims to the UN)
Members of European Parliament were calling for the suspension of an agreement, known as the terror finance tracking program (TFTP), which was agreed in 2010, and requires EU authorities to transfer data to the U.S. Treasury from the Brussels-based system which collates global financial transaction data under the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
But the Commission's plans stopped well short of this. Instead, Malmström said she was keeping her "attention high on the implementation of the TFTP agreement". The Commission is looking at reviewing the TFTP along with other data sharing deals between the EU and US, though there is little indication of a major change to the rules.
The U.S. has denied any wrongdoing, according to Malmström, who said she had "received written assurances by the US authorities" that they were complying with the rules.
—By CNBC's Arjun Kharpal: Follow him on Twitter