Google's response seems a bit overboard.

Not at all. Seems pretty reasonable and entirely within Google's rights to opt out from any link taxes. If it is easier to opt out than to make changes to the service itself to accomodate to individual state laws, then opting out isn't that overboard.

Think of it this way: If you were Google, would you take it and go through all the hoops every time an individual country decides to change their laws and force you to make changes to your service. (Two things: In the case of EU, it'll be over a dozen of countries with different interpretations of one same directive. How would they implement all these minute changes in your service for each country accordingly? How much would it cost?)

After counting all the costs and benefits, Google decided to drop Spain off their News aggregator altogether. Now I'm sure they would have no problem dropping the rest of EU off their service as well and not feel bad about it.

The Directive* explicitly prohibits Member States from imposing on online platforms a general monitoring obligation of the content uploaded by the users.

Yes it may prohibit such laws being imposed, but that doen't make a difference from the point of a service provider especially if they are a social network or a discussion site. The law may state that the service provider has to take out all illegal copies off the site and comply with legal request without a delay. In the case of Google it will be million times easier just to block off the entire country than to find out what "best efforts" in the directive even means, or how to implement the requested changes state-by-state. It would end up being too much work, too expensive and frankly not worth it. In the case of Google, they already have a content filter, so implementing that would not be off the table. Other responses would be cutting off EU countries from the service.

There sure is a lot of ambiguities in the directives eg. what counts as commercial use, "best effort", "very short extract", would a social media site or a blog become a news aggregator, if the users link a lot to other news sites. But this might also leave enough room to be fair and reasonable towards the tech companies so they can continue to deliver the services users expect from them.

Yes but since the rules are so vague, we do not really know what they mean. It will be easier for service providers to cut out EU completely than to figure those limitations out. And even if they did, they'd probably find it easier to just stop serving Europe.

This all goes down to the cost-benefit analysis of the law and its required changes needed to implement on the services. "Is it worth it, counting all the changes and the possible legal fees if 'best effort' doesn't cut it? No? Then let's cut EU off our service."

It is really simple. The directive, the intent behind the directive, the guys implementing the directive, they might all be bening, but how the laws that end up being set up according to the directive will eventually have the effect that in fear of link-taxes, copyright fees and legal fees, and costs of implementing changes to their services to accomodate these laws state-by-state basis, plus the cost-benefit analysis, it will become clear that the cheaper and easier way out of a legislative dead-end is just by not serving Europeans on their platforms.

So...

Instead of asking whether the directive is benign and imposes no filtering or censoring requirements on businesses, the question should be about how it actually affects the business decisions over operations in Europe, when it will be implemented in law.

The real question:

If You were a CEO of a company that serves a social platform where people can share photos, videos, news and all kinds of memes, would you personally be willing to take on the task and costs of making your site EU safe (whatever that means) and still take the risk of legal fees when someone decides a meme shared by millions on your service infringes on their copyright in EU?

If yes, what kind of measures would you end up having to take to prevent being liable in a copyright court?

If no, how would you prevent being liable in a copyright court anyway?