The French government has abandoned plans for a new €580m (£513m) airport in western France, a sensitive decision that past governments had shirked for decades, but announced campaigners who have occupied the site must leave.

The prime minister, Édouard Philippe, said hundreds of people squatting on the site of the proposed new development in the village of Notre-Dame-Des-Landes have until spring to leave.

Up to 300 people who call themselves “resistants” are living on the land earmarked for the airport having declared it a ZAD – Zone à Defendre – and have vowed not to go quietly.

An attempt to dislodge the occupiers – also known as zadists – in 2012, named Opération César [1], resulted in clashes between them and 2,000 gendarmes, and the government backing down in the face of public opposition to the scenes of violence.

Many squatters have since abandoned the temporary shelter of tents and caravans and built wooden shacks and cabins, or occupied empty farms, planting the land around them.

Today there is a boulangerie producing bread from wheat and grain grown in the ZAD, a brewery, a pirate radio station, an online newspaper, a weekly vegetable market, and several herds of cows, goats and sheep producing milk and meat. Produce is shared or sold for whatever the buyer can afford.

Announcing the end of the 50-year on-off plan to develop the 1,650 hectare site, Philippe said the land would remain for agricultural use.

Reactions in France veered from celebration to accusations of capitulation. While locals were overjoyed, airport supporters reacted angrily.

Philippe Grosvalet, president of the departmental authority, said Macron had made a “very bad decision”.

“By this decision he has trampled on importing issues: firstly public procedures, such as the 179 legal decisions. He’s also trampled on our local authorities and on the spirit of decentralisation. In politics when you make a bad decision, there are only bad consequences and this is a very bad result for our area and especially for its economic development and businesses,” Grosvalet said.

Eric Woerth of the centre-right Les Républicans added: “It’s certainly not a brave decision. This announcement is a considerable defeat for public decision and poses serious questions of the State’s ability to decide. In the face of legal decisions and a local referendum (that approved the airport plan), a few dozen zadists have carried out a tour de force – the rolling back of the rule of law.”

Supporters of the proposed airport, designed to handle 4 million passengers a year initially, argued it would have aided economic development in the Loire-Atlantique region and that the existing inner-city airport was congested and a security risk.

But opponents said the project was too costly, unnecessary with an underutilised airport located 68 miles (110km) to the north in Brittany, and not environmentally friendly.

Yannick Jadot, a MEP for the ecology party declared: “A responsible decision …at last!” Jadot added: “It’s a decision that shows years of local resistance … and national mobilisation has paid off.”

The zadists have called a meeting this evening.

Kim Willsher Paris