Microsoft moved a step closer to ending a long battle with the European Union's antitrust watchdog yesterday, winning praise for proposals to comply with demands for server interoperability.

The US software giant could be hit with a fine of up to $5 million (€4 million) a day if the European Commission concludes that its proposals would not allow non-Microsoft work group servers to achieve full interoperability with Windows PC and servers.

But the EU executive voiced satisfaction with Microsoft's proposed solution - even though the sticky question of "open source" licences was not fully resolved - and said the plan would now be put to industry peers for their opinion. "I am happy that Microsoft has recognised certain principles which must underlie its implementation of the Commission's decision," European competition commissioner Neelie Kroes said in a statement.

A Commission spokesman said there were "no outstanding issues" on Windows Media Player, the second of two antitrust violations for which Microsoft could face fines, because proposals for compliance had already been tested in the market.

Microsoft confirmed meanwhile that it had made a number of concessions to address the Commission's concerns.

The Commission, which polices competition in the EU, fined Microsoft a record €497 million more than a year ago and demanded changes to its business practice, which it found were an abuse of a quasi-monopoly.