Greeks risk Olympic Airways aid clawback

Date: 04/05/05

Greece could be ordered next week to demand repayment of €194 million of illegal state aid which it gave to its flagship airline Olympic Airways.

The European Court of Justice ruling on 12 May will end a long-running battle between Athens and the European Commission.

The EU took Greece to court in 2003 after it had failed to recover social security and tax concessions as well as €41 million in restructuring aid. The Greek government was defiant, insisting on passing a law transferring the assets of Olympic Airways to a new company, Olympic Airlines, just days before the EU legal action began.

In February, Leendert Geelhoed, one of the court's advocates-general, said this law effectively blocked the aid repayment and prevented the Commission from doing its duty to uphold competition rules.

He said the Greek government's law had stripped Olympic Airways of all assets, making it unable to pay back the aid. Geelhoed said this allowed its successor, Olympic Airlines, to gain all the competitive advantages of the state subsidy.

Although advocate-generals' opinions are not binding on the court, the final judgement often follows their recommendations.

The Commission initially cleared the restructuring plan for Olympic Airways in 1998 but subsequently declared it illegal when it discovered that Greece had not asked the airline to pay social security and tax arrears.

Anticipation of a ruling by the European Court of Justice, awaited for 12 May 2005, to end a long-running dispute between Greece and the European Commission on the repayment of €194 million of illegal state aid which the country had given to its flagship airline Olympic Airways.