Last-minute talks between Microsoft's chief executive Steve Ballmer and European Commission competition commissioner Mario Monti have collapsed, clearing the way for a ruling against the software giant next week.

After two days of negotiations, Monti today issued a statement saying: "A settlement on the Microsoft case has not been possible.

"I therefore intend to propose to my colleagues in the Commission next Wednesday to adopt a decision, which has already received the unanimous backing of member states."

The case against Microsoft centres on allegations that it abused a dominant market position to squeeze out competition in the media player market, a charge that echoes earlier controversy over how it tied Internet Explorer to Windows.

For its part, Microsoft is reported to have offered all computer manufacturers in the European economic area two media player programs specified by the Commission, and a CD with other media players would be offered with PCs.

"I believe we reached an agreement on the issues of the case. But we were unable to agree on principles for new issues that could arise in the future," said Steve Ballmer in a statement.

Microsoft "made every possible effort to settle the case", he added.

Monti stressed "the constructive and co-operative spirit displayed by Microsoft in the last few weeks", but said a "strong precedent" was still needed.

"It is essential to have a precedent which will establish clear principles for the future conduct of a company with such a strong dominant position in the market," he said.

The European Commission is expected to issue a fine, possibly running into hundreds of millions of Euros, when it gives its formal ruling on 24 March.

It may also order Microsoft to offer a version of Windows without the media player or to open some of its source code for access by rivals.