(BRUSSELS) - EU regulators gave the green light Wednesday to Greek plans to privatise Olympic Airlines and Olympic Airways, but said 850 million euros (1.2 billion dollars) of illegal state aid must be returned.

"It is my conviction that a new air transport market in Greece undistorted by state aid can develop," said European Transport Commissioner Antonio Tajani, announcing the decision.

The EU Commission concluded that, since its last decision on the issue in 2005, the "Greek flag-carrier Olympic Airways Services and Olympic Airlines have received further state aid estimated at more than 850 million euros".

This money to the cash-strapped national carrier was found to be "incompatible with community law" and must therefore be returned, according to the EU executive.

Athens and Brussels have been at odds on the subject for years, with the commission regularly accusing Greek authorities of illegally bankrolling the company, founded in 1956 by late shipping magnate Aristotle Onassis.

The Greek government has spent years seeking private investors to take over Olympic Airlines, which is crippled with debt, but the process is complicated by the European Commission's demand that the company repay illegal state aid.

Last December the commission launched a fresh investigation into new Greek state aid to its ailing national carrier over aid received since the end of 2004.

The commission had already ordered Olympic Airlines -- the result of restructuring Olympic Airways in 2003 -- to repay hundreds of millions of euros in illegal payments.

"The Olympic Airways and Olympic Airlines cases have been a source of contention between the Commission and Greece since 1994," said Tajani.

"Even today in partially closing a further investigation we have found a further 850 million euros of state aid has been granted to these companies.

"I strongly hope that with today's commission approval of the privatisation plan we send the message that we want a definitive break with the past," he added.

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