What Google knew when, and how Google co operated with the NSA and other agencies is something we will probably never know. Or at least not for a long time.
The first files that came out seemed to speak of direct access for the NSA into the datacenters done with the support of Google.
These speak of even more intrusive surveillance.
Personally I dont believe for a second that Google has not been fully cooperative with the needs of the American Intelligence community all the time. However Google needs a bit of good PR to ensure that they are not hit too hard with a backlash. As long as Google can maintain plausible deniability they are fine.
I dont see anything criminal that the NSA does as far as US law goes, unless they are spying on American citizens (which they are doing).
Spying in any way possible on other countries is not only legal but a bit reason for the existence of NSA, CIA etc.
There is an understanding in the international community that
spying may occur.
However there is also a long tradition that if someone is caught with their hand in the cookie jar, a harsh response is expected. The expulsion of diplomats, dropping trade deals, dropping mutual agreements (think US/USSR) and so on.
Also the criminal persecution and interrogation of enemy agents discovered.
A couple of points to make
1) Europe has so far not really reacted much to the news.
Some blabbing in the press, a bit of travel, but aside from
that little has changed.
2) the biggest threat over this for Europe is not so much the disposition of troops, where and how bombs are kept etc, its industrial espionage and leverage for getting EU countries to sign deals to buy American. A good recent example is the sale of JSF. The embassies were very heavily involved in ensuring that nations in Europe bought JSF. I find it impossible to think that intelligence gathering was not offered to ensure that this took place.