Mass surveillance programmes used by the US and Britain to spy on people in Europe have been condemned in the "strongest possible terms" by the first parliamentary inquiry into the disclosures, which has demanded an end to the vast, systematic and indiscriminate collection of personal data by intelligence agencies.

The inquiry by the European parliament's civil liberties committee says the activities of America's National Security Agency (NSA) and its British counterpart, GCHQ, appear to be illegal and that their operations have "profoundly shaken" the trust between countries that considered themselves allies.

The 51-page draft report, obtained by the Guardian, was discussed by the committee on Thursday. Claude Moraes, the rapporteur asked to assess the impact of revelations made by the whistleblower Edward Snowden, also condemns the "chilling" way journalists working on the stories have been intimidated by state authorities.

Though Snowden is still in Russia, MEPs are expected to take evidence from him via video-link in the coming weeks, as the European parliament continues to assess the damage from the disclosures. Committee MEPs voted overwhelmingly on Thursday to have Snowden testify, defying warnings from key US congressmen that giving the "felon" a public platform would wreck the European parliament's reputation and hamper co-operation with Washington.

While 36 committee members voted to hear Snowden, only two, both British Conservatives, voted against. "Snowden has endangered lives. Inviting him at all is a highly irresponsible act by an inquiry that has had little interest in finding out facts and ensuring a balanced approach to this delicate issue," said Timothy Kirkhope, a Tory MEP. "At least if Snowden wants to give evidence, he will now have to come out of the shadows and risk his location being discovered."

The Lib Dem MEP Sarah Ludford denounced the Conservative position. "To ignore [Snowden] is absurd. The issue of whether the intelligence services are out of control merits serious examination in Europe as in the US. The Tories' ostrich-like denial is completely out of step with mainstream opinion in both continents, including Republicans in the US and Merkel's centre-right party in Germany. But their line is consistent with the obdurate refusal of Conservatives at Westminster to clarify and strengthen safeguards on snooping by GCHQ."

The draft by Moraes, a Labour MEP, describes some of the programmes revealed by Snowden over the past seven months – including Prism, run by the NSA, and Tempora, which is operated by GCHQ.The former allows the NSA to conduct mass surveillance on EU citizens through the servers of US internet companies. The latter sucks up vast amounts of information from the cables that carry internet traffic in and out of the UK.

he report says western intelligence agencies have been involved in spying on "an unprecedented scale and in an indiscriminate and non-suspicion-based manner". It is "very doubtful" that the collection of so much information is only guided by the fight against terrorism, the draft says, questioning the "legality, necessity and proportionality of the programmes".

The report also:

• Calls on the US authorities and EU states to prohibit blanket mass surveillance activities and bulk processing of personal data.

• Deplores the way intelligence agencies "have declined to co-operate with the inquiry the European parliament has been conducting on behalf of citizens".

• Insists mass surveillance has potentially severe effects on the freedom of the press, as well as a significant potential for abuse of information gathered against political opponents.

• Demands that the UK, Germany, France, Sweden and the Netherlands revise laws governing the activities of intelligence services to ensure they are in line with the European convention on human rights.

• Calls on the US to revise its own laws to bring them into line with international law, so they "recognise the privacy and other rights of EU citizens".

The draft, still to be voted on by the chamber, has no legal force and does not compel further action, but adds to the growing body of criticism and outrage at the perceived intelligence abuses.

Separately, the European parliament has drafted new legislation curbing the transfer of private data to third countries outside the EU and setting stiff conditions for the information transfers.

But hopes of getting the new rules into force before elections for the parliament in May are fading because of resistance from the UK and EU governments. "This is a tough issue, even thorny," Greece's justice minister, Charalampos Athanasiou, told the Guardian. Greece took over the running of the EU for six months this week. "There are different views in the member states. I can't be sure about being successful."

Moraes condemns the way the Guardian was forced to destroy the Snowden files it had in London, and says the detention at Heathrow of David Miranda, the partner of the former Guardian journalist Glenn Greenwald, constituted an interference with the right of freedom of expression under article 10 of the European convention on human rights.The report is also highly critical of the data exchange scheme Safe Harbor, which allow swaps of commercial information between US and European companies. The draft also questioned the Swift scheme supplying European financial transactions information to the Americans to try to block terrorist funding and the supply of information on transatlantic air passengers.

The European commissioner Viviane Reding says the Safe Harbor scheme is flawed and may need to be frozen.

She wants to make it harder for the big US internet servers and social media providers to transfer European data to third countries. She also wants to subject the firms to EU law rather than secret American court orders.

The Moraes report says the web companies taking part in Safe Harbor have "admitted that they do not encrypt information and communications flowing between their data centres, thereby enabling intelligence services to intercept information".

He calls for the suspension of information sharing until companies can show they have taken the all necessary steps to protect privacy.

The report calls on the European commission to present by this time next year an EU strategy for democratic governance of the internet, and warns there is currently "no guarantee, either for EU public institutions or for citizens, that their IT security or privacy can be protected from intrusion by well-equipped third countries or EU intelligence agencies".

It adds: "Recent revelations in the press by whistleblowers and journalists, together with the expert evidence given during this inquiry, have resulted in compelling evidence of the existence of far-reaching, complex and highly technologically advanced systems designed by US and some member states' intelligence services, to collect, store and analyse communication and metadata of all citizens around the world on an unprecedented scale and in an indiscriminate and non-suspicion-based manner."