The UK secured an agreement for storing details of telecoms and internet use at an emergency meeting of EU security ministers yesterday.
The plans seek to establish a pan-European standard requiring companies to retain mobile phone and internet data for a set period of six months or a year.
Home Secretary Charles Clarke said after the meeting: "There was a great readiness by all ministers to make the agreements that are necessary.
"There is a discussion that has to take place with the European Parliament so it is not an instantaneous thing, but it will happen in the next two or three months."
Clarke convened the meeting in a bid to increase co-operation across Europe on anti-terrorism legislation.
One of the problems facing UK investigations is that phone data is not held for any length of time in many member states, notably Denmark and Germany.
The retention of data relates to details of the communication but not the actual content of the phone call, SMS or email message.
Such a move has been resisted by most countries for reasons of privacy, cost and effectiveness.
The European Telecoms Network Operators Association (ETNO), a lobby group for Europe's incumbent telecoms companies, believes that the plan is unworkable and too costly.
ETNO estimates that it will cost larger companies like BT £124m to set up a database and a further £30m annually to maintain it.
The lobby group also claims that there is no technology currently available to make it possible to quickly search such potentially huge databases.
Roger Turner, director of storage at Hitachi Data Systems, said: " The proposed legislation will add extra expense and management to an already significant storage burden and this is likely to send ISPs into a panic.
"As the data will have to be held on discs rather than tape for fast retrieval, the potential costs look impossible to bear."
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