Google in trouble with EU over privacy

Privacy experts have always been somewhat hesitant about the level of information gathered by Google about the people using the services provided by Google. People reveal a lot about themselves through the items they search for, and along with their IP addresses, a lot can be gleaned just from these records. And Google will maintain all such records for a period of 2 years. This data helps Google fine-tune its advertising, using these records to direct ads more efficiently at users.
However, the European Union is pretty gung-ho about maintaining adequate security and the time period that Google maintains does not seem to be acceptable to it. And this issue is getting heated up. In addition, the EU packs a hefty punch. It has 400 million consumers for Google, a very large number.
In a escalation, data protection chiefs from the 27 EU countries wrote to Google asking for a justification of its policies on data retention and storage. Refer this article:

In the latest example of a U.S. technology giant potentially being called on the carpet in Europe, Google has been warned that it may be violating European Union privacy laws by storing data on its users for up to two years.
Privacy experts said the letter was the first salvo in what could become a determined effort by the European Commission to force Google to change how it does business in the EU, whose 400 million consumers outnumber the United States.
Any EU effort to impose limits on Google, which as a U.S.-based firm operates under U.S. law, would be the latest in a series of increasingly aggressive actions taken by European policymakers to reign in global technology companies.
According to one member, who declined to be named because he was not authorized to speak for the group, the panel is concerned that Google's retention period is too long and is designed to serve commercial interests.

Google in the past has shown that it is responding to privacy concerns by setting an absolute time limit of 2 years for how long the data will be stored (from the earlier infinite time interval). However, if this time period is not good for EU officials, then Google can be in for a fair amount of trouble. The EU have showed that they can take on large corporations, having taken on Microsoft earlier.
More interesting is whether Google will comply, and what that will mean for other search providers such as Microsoft and Yahoo that are not yet disclosing the interval to which they store their records. My feeling is that if pushed hard enough, Google will accept to reduce the time interval by a few more months to get a compromise.