Minister Kostas Skandalidis said he would file an appeal before the European Court of Justice to annul a Commission decision ordering Greece to return the subsidies to Greek farmers.
The money "will ultimately pose a huge burden on the national budget and deficits and ultimately Greek society," Skandalidis said, stressing the importance of EU farm subsidies for Greece.
"Community subsidies of Greek agriculture are over €2.5 billion per year in addition to national funding of this sector," he said, adding that the sum represents 40% of Greek farmer's income and 75% of agricultural investment.
"What is essential is the efficient use of resources in order to avoid jeopardising a dynamic industry that can act as a catalyst for an economic restart," the Ministry argues in a statement.
A decision expected to be published in the official journal of the EU says the total amount of the "illegal" state aid is up to €424.8 million. The same decision sets a deadline of four months for the refund, including interests.
The Greek argument
The main argument that the Greek side will present before the court is the Temporary Framework for State Aid measures adopted by the Commission in 2009.
Under this Framework, state aid could be granted by national governments in order to weather the credit crunch as part of the European Economic Recovery Plan. The Framework was due to expire on 31 December 2010 but was later prolonged for one more year.
The Commission made clear that the measures under the programme would still constitute state aid, and that it should be notified about them so that it could give its approval.
Greek officials acknowledge that the Commission was not notified of this aid package before distributing it to farmers. "The former minister did not wait for the approval of the EU and the whole procedure was not handled properly and that leaves us with a greater challenge at the moment," a Greek official told EurActiv.
Although they have little hope of winning the case, Greek officials say the legal challenge will at least give the government some respite at a time when it is already struggling to pay wages for its civil servants.
Skandalidis accused his predecessor, Sotiris Hatzigakis and former Economy Under Secretary Nikos Legas of flouting EU state aid rules when they handed out money to Greek farmers in 2009.
“These payments did not respect the rules of state aid," Skandalidis said, pointing the finger at "communication manipulations" that accompanied these payments.