(BRUSSELS) - Europe's top court ruled against Greece Thursday for failing to recover state aid from Olympic Airlines and Olympic Airways despite Greek claims that an EU demand to do so was illegal.

"A member state to which a state aid decision has been addressed cannot validly justify failure to implement that decision on the basis of its alleged illegality," the European Court of Justice (ECJ) ruled.

The European Commission has continued to probe funds given to Olympic Airlines and Olympic Airways Services since it decided, in September 2005, that "illegal and incompatible state aid" had been granted.

At that time, the EU's competition regulator ordered the repayment of hundreds of millions of euros in state aid, which allegedly came in tax and social security concessions, aircraft leasing financing and special creditor protection.

Athens and Brussels have been at odds on the subject for years.

The Luxembourg-based ECJ said "that by not taking within the prescribed period all measures necessary to put an end to aid declared unlawful and incompatible with the common market, and to recover it from the recipients, Greece has failed to fulfil its obligations."

A commission spokesman welcomed the court ruling, saying it had again "proven the solid basis of the commission's previous decisions on the Olympic issues" and that "the 2005 decision is well founded".

"It also confirms the urgent need for a viable and legally sound solution of this file," he said.

The Greek government said in December that Olympic Airlines cannot be saved in its present form and should be replaced with a new company.

Greece has spent years negotiating how to deal with the airline's long-running debts, estimated at 2.4 billion euros (3.5 billion dollars) amid annual losses of 245 million euros.

Judgment of the Court of Justice in Case C-419/06 - Commission of the European Communities v Hellenic Republic (press release, pdf)

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