A nine-month interim agreement went into force provisionally at the start of February but deputies from the assembly’s Liberal, Socialist and Green groups opposed it on the grounds it failed to protect the privacy of EU citizens.

Washington will now have to seek other ways to access information on money transfers in Europe until it can negotiate a permanent agreement with the EU. It says such data is vital to track terror suspects.

Underscoring US concerns, Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton wrote to parliament president Jerzy Buzek to ask for support.

EU governments also made last-minute appeals, pledging to give deputies better access to future talks with Washington.

But Buzek said more data privacy protection was needed.

“The majority view … is that the correct balance between security, on the one hand, and the protection of civil liberties and fundamental rights, on the other, has not been achieved,” Buzek said in a statement after the vote.

Washington previously had access to the data, collected by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which registers money transfers among states. But it lost it when SWIFT changed its server infrastructure in recent months. It now wants a permanent agreement on data sharing.

One way to regain access could be to seek bilateral agreements with states hosting SWIFT servers, Switzerland and the Netherlands, EU diplomats say.

“This outcome is a setback for counter-terrorism cooperation (between the US and the EU). We are disappointed and are evaluating our options how to proceed from here,” a US government spokesperson said, without elaborating.

Power struggle in Brussels
Concerns over data protection have dogged data transfers since SWIFT said in 2006 it was cooperating with the US authorities as part of their anti-terror activities after the September 11, 2001 attacks.

The rejection of the interim deal by the European Parliament is also part of a drive to ensure that its expanded powers, gained under the EU’s Lisbon treaty, are respected in practice.

Among other provisions, the treaty allows the parliament to decide jointly with EU governments on justice and home affairs.

To allay parliament’s concerns, EU Member States pledged to deepen privacy protection in any new agreement and allow deputies better access to classified documents subject to the negotiations.

Under the agreement rejected by parliament, investigators already would have to justify their demand for information in each case and could seek access only to data on people suspected of terrorist activities.

The Spanish government, which holds the EU’s six-month rotating presidency, also sought to press the benefits of data sharing. A cabinet minister told parliament that information exchange had helped thwart an attack on Barcelona and data was used to investigate the 2004 Madrid train bombings.