The European Commission thinks the European bloc has been slow to adopt cloud computing in part because of security fears over data loss and privacy, particularly in view of America’s Patriot Act.

So it’s proposing to get involved in standards setting, contract conditions and SLA terms on the happy theory – provided by IDC – that its intervention in cloud adoption will expand the European Union’s overall GDP by close to €1 trillion by 2020 – that’s €160 billion or $206 billion a year – and create 2.5 million jobs.

The scheme, called “Unleashing the Potential of Cloud Computing in Europe,” is laid out in couple of position papers released Thursday.

Neelie Kroes (pictured above), who used to be antitrust commissioner and is now digital agenda commissioner, claimed that “Cloud computing is a game changer for our economy. Without EU action, we will stay stuck in national fortresses and miss out on billions in economic gains. We must achieve critical mass and a single set of rules across Europe. We must tackle the perceived risks of cloud computing head on.”

Among the initiatives on the agenda is the idea – already underway – of creating a so-called European Cloud Partnership consisting of the procurement officers in all the EU’s public agencies, which are responsible for 20% of the region’s IT spend, and have them set common requirements – like demanding interoperability – and pool their buying power.

Cloud-based e-government service would set an example and local providers would be favored with a leg up in the hope Europe can keep up with the US.

Anyway, the EC is proposing to sort out the jumble of security standards, develop a global data privacy standard, legislate a data-sensitive model contract and clarify knotty cross-border legal questions on data protection and liability by next year.

“You shouldn’t have to have a law degree to use the cloud,” Kroes cracked. “But today, many potential users think it’s too complicated, too risky, or too untrustworthy.”

According to Reuters, poor debt-ridden Greece “shows a bigger cloud appetite than its biggest European creditor, Germany,” allowing that maybe it’s because its hardware is coming up for renewal.

However, the Commission’s data suggests that EU companies could cut their costs by up to 20% by using the cloud.

The plan is to get an EU-wide certification scheme in place for “trustworthy cloud providers” as well as establish “safe and fair” contract terms and SLAs by next year.

The current contracts, the EC complains, may “impose the choice of applicable law or inhibit data recovery. Even larger companies have little negotiation power, and contracts often do not provide for liability for data integrity, confidentiality or service continuity.”

It will review the standard clauses governing the transfer of personal data to third countries. There will have to be “binding corporate rules” for cloud providers and the industry will be asked to endorse a data-protection code of conduct.

The EC means to get the European Telecommunications Standards Institute (ETSI) coordinating with stakeholders so a “detailed map of the necessary standards (inter alia for security, interoperability, data portability and reversibility)” can be drawn by 2013. It’s also pushing for standards around the cloud’s environmental impact, including energy consumption, water consumption and carbon emissions, to be in place by 2014.

See the 16-page document [PDF] here.