The European Union's top competition watchdog on Monday appeared to be stepping back from a new confrontation with Microsoft, saying the US software giant had moved closer towards complying with its landmark antitrust ruling.

The European Commission had earlier warned that the failure to implement the antitrust sanctions imposed last year would trigger financial penalties worth up to $5m a day. The fines would come on top of the record €497m ($610m) Microsoft was ordered to pay in March 2004 for breaking EU competition rules.