The eavesdropping network - led by the US and the UK, with cooperation from Canada and Australia - has been in place since the Cold War. Its existence, denied until now by the US National Security Agency, has now been confirmed by the European parliamentary committee.
"Analysis has revealed that the system cannot be nearly as extensive as some sections of the media have assumed," says the report, which rules out claims that Echelon has been used for industrial espionage.
The European Parliament is not prepared to talk about the leaked Echelon report until a full report, expected later this year, has been finalised.
"This has been blown up by the media," said a European Parliament spokesperson. "Our findings have satisfied us that there has been no industrial espionage and that citizens' rights have not been affected."
This judgement seems at odds with other reports made to the EU, and even appears to contradict itself. The committee was quick to dismiss allegations that the US had used Echelon to damage European commercial interests. But it confirmed its use was primarily to intercept commercial and private communications, rather than military intelligence as its members claimed.
Despite the assurance that 'innocent parties should not worry', the report positively urges private individuals to encrypt e-mails.
"People should treat their e-mails like seaside postcards," said Neil McCormick, vice chairman of the parliamentary committee. "That is to say anything put anything you like in them but don't be surprised if someone else reads them."
The EU's position on Echelon is that is does not "breach union law [specifically that relating to human rights] because it does not concern the areas of union law that would be required for there to be incompatibility."
But the report adds that any tangible threats created by Echelon should be addressed through EU legislation to maintain a standard level of privacy protection across Europe.