Link to Part 1 of the study (wherein the recommendation lies): http://www.europarl.europa.eu/RegData/etudes/STUD/2015/52740... Part 2 of the study recommends government funding of Open Source Projects: http://www.europarl.europa.eu/RegData/etudes/STUD/2015/52741... Potential and actual conflicts of interest between governments and citizens in regard to privacy are not addressed.
They don't address conflicts of interest but it seems like they're fine with privacy: "[...] the use of open source computer operating systems and applications reduces the risk of privacy intrusion by mass surveillance. They seem to be touting that as a benefit, not a drawback.
The NSA's role in weakening open source encryption standards was the result of the internal logic by which all intelligence organs typically operate irrespective of sponsoring state. The differences between the politics of some EU states and the politics of the US or Russia or the UK don't change that internal logic of intelligence organs. Their job remains to maintain data collection capability.