* Long-term ETA leader was fugitive from justice since 2002
* Arrested over conviction for belonging to terrorist group
* Wanted in Spain over 1987 Zaragoza bombing that killed 11
* He announced dissolution of Basque group in 2018 (Adds Ternera being admitted to hospital following arrest)
MADRID, May 16 (Reuters) - ETA kingpin Josu Ternera, described by Spain as the Basque separatist group's most wanted fugitive, was arrested in France on Thursday after more than 16 years in hiding from court orders served in both countries.
Ternera was a long-time leader of the group that, before he announced its dissolution in 2018, is estimated to have killed more than 850 people during a 50-year guerrilla campaign aimed at creating a Basque state in northern Spain and southwest France.
He was sought in Spain over accusations of ordering a bomb attack on a Civil Guard barracks in the city of Zaragoza in 1987 that killed 11 people, including six children.
He was arrested in the French Alps on a separate warrant from a Paris court that in 2017 sentenced him in absentia to eight years in prison for membership of a terrorist group, a French judicial source said. Following his arrest, Ternera was admitted to hospital, according to El Mundo.
Spain's acting Interior Minister Fernando Grande-Marlaska said the 69-year-old, also known as Jose Antonio Urrutikoetxea, should face justice in both countries.
Ternera was detained in a car park, Grande-Marlaska told reporters, in a joint Franco-Spanish operation in the alpine Haute Savoie region near France's border with Switzerland and Italy.
Ternera was on his way to receive cancer treatment at the time and was arrested in the car park of a hospital in the town of Sallanches, according to El Pais.
He had been a fugitive since late 2002 when, while he was serving as a lawmaker in the Basque regional parliament, Spain's supreme court issued an international arrest warrant against him over the 1987 attack.
The Association of the Basque Country Victims of Terrorism (Covite) welcomed his arrest and said it wanted Ternera to be tried for all of his alleged crimes.
"Today we start on a path to dignity," said Covite president Consuelo Ordonez said in a tweet. The group had been pressing for his arrest for years.
Grande-Marlaska said Madrid would seek to prosecute Ternera but "without prejudice to the criminal responsibilities in France".
"He could serve (his sentence) in France, but he must be sent to Spain temporarily to be judged and later be returned to France." He could however also choose to serve the sentence in Spain as a Spanish citizen, the minister added.
Pilar Vallarin, who lost a brother and niece in the Zaragoza bombing, said she was satisfied by the news, though she wished the arrest had happened sooner. "We've lived for 31 years knowing that this guy is free and at ease," she told Basque Radio SER Euskadi.
ETA (Euskadi Ta Askatasuna, or Basque Country and Freedom) declared a ceasefire in 2011 and handed over weapons in April 2017, bringing Western Europe's last major armed insurgency to a close. In May 2018, Ternera announced it had dismantled all its structures.
"Franco-Spanish cooperation once again demonstrated its effectiveness," acting Spanish Prime Minister Pedro Sanchez said in a statement welcoming Ternera's arrest. (Reporting by Sabela Ojea, Andres Gonzalez, Andrei Khalip; Emmanuel Jarry in Paris; Writing by Ingrid Melander editing by John Stonestreet)
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