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Commissioner Reding, the head of the EU's Information Society and Media directorate, said that the technology must be 'allowed to grow'. She added that there are around one billion RFID tags in use worldwide today, but the Commission expects over 500 times as many tags by 2016. The European market alone is expected to be worth €7 billion by then.

At last year's CeBIT show, Commissioner Reding announced a public consultation process on RFID, paying particular attention to security and privacy issues. The Commission found that public awareness of the technology was low.

But among respondents who were familiar with the technology, 70 per cent believed that technical solutions were the best way to deal with security, data protection and privacy. Fewer Europeans - 55 per cent - favoured regulation.

Today, the European Commission responded by announcing that it would create an RFID Stakeholder Group, including representatives

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from industry as well as from consumer groups. By the middle of this year, the Commission will also produce a number of proposed amendments to the e-Privacy Directive to take account of RFID.

This will be followed by recommendations for member states on how to handle any data security and privacy issues affected by the use of RFID.

The Commission is releasing UHF radio spectrum for the tags, and will also work with non-European governments to promote international standards for RFID. Commissioner Reding has already met with the Russian prime minister and plans discussions in China, Japan and Korea on the issue.

'The RFID stakeholder group will make recommendations on how to handle security and privacy of smart radio tags,' Commissioner Reding said. 'We will clarify how the e-Privacy Directive will be used and applied to the RFID world. "There will be no new regulations but we will clarify how existing regulations apply to the technology.'

Commissioner Reding said that she was anxious to avoid over-regulation or a top-down approach to RFID, citing benefits from the technology such as making it harder to supply counterfeit pharmaceuticals. But the Commission is also anxious not to hamper the development of an industry where European firms have a leadership position, she added.

'From fighting counterfeits to better health care, smart RFID chips offer tremendous opportunities for business and society," she said. "But the internet of things must become an internet of people.'