Talks between Microsoft and Mario Monti, the European competition commissioner, have collapsed, leaving the way clear for a damning decision about the software giant's business practices next Wednesday.

In a prepared statement, read out to journalists in Brussels, Monti said that despite strenuous efforts by Microsoft to meet the European Commission's concerns, a settlement of the case "has not been possible". "Therefore we will propose next Wednesday that the Commission adopts a decision," he continued.

"In the end, I had to decide what was best for competition and consumers in Europe. I believe they will be better served with a decision that creates a strong precedent," he said. "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."

That means that Microsoft will find itself at the end of a negative judgement over its alleged abuse of the operating system monopoly it has enjoyed through Windows. The case has been going on for five years but in a draft ruling, released earlier this month, the European Commission finally came to the decision that Microsoft was guilty of abusing its position to muscle out rivals in the connected media and server software markets.

As well as a fine, it is expected that the EC will order Microsoft to offer a version of Windows with its Media Player software stripped out and demand Microsoft open up its software to developers so rivals can make interoperable software.

The head of Microsoft, Steve Ballmer, arrived in Brussels this week in a last-ditch effort to strike a deal. But Monti apparently demanded even tougher remedies from Microsoft in return for a settlement that averted a precedent-setting negative ruling.

Monti's meeting with Ballmer was brief and followed a four-hour meeting with Microsoft's chief lawyer Brad Smith. A second, face-to-face meeting between Monti and Ballmer was termed "unlikely".

The EC is expected to fine Microsoft between €100 million (£67 million) and €1 billion for having broken the European Union's antitrust laws. To waive the ruling, Monti asked Microsoft to commit not to distort competition by bundling peripheral software programs to Windows in the future. Microsoft, it would appear, declined.

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

Microsoft's lawyer, Brad Smith, made it clear the software giant was not taking it lying down though. "Today is just another step in what could be a long process," he said, trotting out the usual Microsoft line that by tying in its software with Windows that it is innovating and adding features. "Perhaps the courts will provide the clarity that is necessary to resolve these issues," he said, making it clear that Microsoft will appeal any decision made against it.