I think EU's bluff has been called
"No, we're not going to respect the privacy of your citizens. So? What are you going to do about it?"
Really, the only thing that the EU can do is to declare it illegal to store EU user data out of the EU. I'm not sure it would be very useful, and I'm not sure the users themselves care a lot; but it's completely silly to pretend that the US are going to respect the privacy of EU citizens, when they basically don't even respect that of US citizens.
That, or they drop the charade, and they admit that they are unable to guarantee the privacy of their citizens.