Federated Identity Management Systems (IMS) is a promising system where an increasing number of e-services will be made available in the future for users? convenience. However in this environment, users are required to manage several identities (ID cards) and a great number of personal data. As such, simplification of users? involvement is highly needed while increasing the users? confidence, and guaranteeing security. This paper proposes a low-cost authentication solution which leads to a reduction of users? identities, even across several circles of trust, while maintaining high-level security. Also it proposes a privacy preserving technique to automatically control that privacy preferences of the users are satisfied during electronic transactions. This leads to defining new entities in the federated IMS, an innovative privacy policy language XPACML, and a practical-oriented privacy policy comparison middleware.