The PUL (swedish privacy law) restricting where and how you can store information about citizens is quite famous (infamous?) among swedish technologists. Which is not saying that you're wrong, I wouldn't expect non-swedes to be familiar with it.

But still, isn't it sensible for the government to keep internal information within the national borders?

I've understood that most people have been surprised by the surveillance just because its in an area not many people pay attention to, but for a well run government to A. Not know this is going on or B. Not expect it, is inexcusable.