The EU want microsoft to give other main browsers similar prominence and availability as IE; either as an install option, a post-install screen; or even making them available through windows update, though they haven't got to the final decision stage yet.
Microsoft doesn't want any of that, as it will dilute their IE monopoly which they've fought very hard to build up.
So instead, they're jumping the gun, and shipping without IE at all in europe. Since it will be the same price as imported versions including IE (like N versions of vista) they're assuming people who want to buy retail copies will just get an import copy with IE in. They're also assuming that OEMs will take the path of least resistance, and just put IE back on before building the image; why deal with the customer support headache of 'where's the internet button?' when you can just ship what people expect?
And if people get a copy without IE? Well, they'll just bitch and blame the EU for fiddling about needlessly.
So instead of actually improving browser competition, and giving alternate browsers an equal shot - as the EU wants - microsoft will effectively end up with its IE monopoly preserved by imports and OEMs, while saying 'this is what you wanted, mr EU?'
The reason microsoft having a browser monopoly is a 'bad thing' is because of this:
Microsoft have a monopoly with windows on the desktop. Since every copy of windows comes with free IE, developers can assume that near everyone has IE. So they can code up some horror of a site in activex, have it run solely in IE, and everybody will still be able to get it - no need to support standards, or alternate browsers. This has already happened in south korea for one example, where all the bank sites are written in activex; no IE, no online banking.
Since current IE only runs on windows, that means that IE-only sites help ensure that people also have to run windows directly or at least buy a copy for a virtual machine, so they can do things on the internet. This is also bad for security; there's a lot of drive-by websites exploiting holes in IE, partly because it's a high value target with a lot of users.
By breaking the monoculture of IE, and having a plethora of browsers in regular use, it means developers have to code to the standards instead of only supporting IE, and that means using another OS like OSX or linux won't mean giving up half the internet as inaccessible. Competition from viable alternate OSes, and browsers will force microsoft to keep up, benefitting cutomers.
The best way to do that is to put the alternative browsers front and centre, so people get to make an informed choice, instead of having the default thrust upon them so there's no point bothering to change.
