* Poland cancels multi-billion-dollarzloty helicopter deal with Airbus
* French company threatens legal action
* Polish officials say offer was not viable economically
By Pawel Sobczak and Marcin Goettig
WARSAW, Oct 12 (Reuters) - Poland's government has blamed Airbus Helicopters for the breakdown last week of a multi-billion-dollar deal, escalating a row that is likely to fuel tension with foreign investors and delay massive army modernisation plans.
Airbus has accused the Polish government of shifting the goal posts as it competed with U.S. and Italian rivals to sell Poland multi-purpose helicopters. On Tuesday, it threatened legal action over the cancellation of the contract.
Defence Minister Antoni Macierewicz said the French company, not the Polish government, had walked away from talks, and Airbus should compensate Poland for any financial losses.
The decision appears to be the latest effort by the year-old government to make eastern Europe's largest economy less dependent on foreign money. But it adds to mounting displeasure with Poland in western Europe.
The country's euro-sceptical government opposes the European Union's immigration policy and has tried to reform the Constitutional Court, which western governments see as a threat to democratic checks and balances.
By souring ties with France, NATO member Poland also risks losing an important ally in its push for tough EU policy toward Russia, just as Moscow is flexing its military muscles by moving nuclear-capable missiles into the Kaliningrad enclave bordering Poland.
Macierewicz defended the economic rationale behind the cancellation, saying the Airbus offer had been expensive and offered insufficient offsets - agreements by a seller to buy products from a customer that typically go with defence contracts.
"The contract was geared towards the French producer and disregarded the Polish producer," Macierewicz told the broadcaster TVP Infor. "There is a question of compensation here which Poland should seek."
The helicopter deal is part of a $40 billion long-term army refurbishment project. It aims to bring Poland's largely Soviet-era military hardware up to NATO standards.
Poland's former government, in power until October 2015 election, had provisionally selected Airbus to sell it 50 Caracal multi-role helicopters, as part of this effort.
Before winning the October election, the Law and Justice party (PiS) had criticised the Airbus talks, accusing the government of putting local industry at a disadvantage.
Grzegorz Schetyna, the head of the former ruling party, Civic Platform, in turn questioned an announcement on Tuesday that the government would buy military helicopters from factories in the Polish towns of Mielec and Swidnik. Both are areas where PiS enjoys strong public support.
The two factories are controlled, respectively, by Sikorsky Aircraft Corp, a unit of Lockheed Martin Corp, and AgustaWestland, part of Italy's Leonardo-Finmeccanica.
"We don't know what led to these decisions," Schetyna was quoted as saying by the newspaper Gazeta Wyborcza on Wednesday.
"The public must know the details of this grim story which takes us out of the EU and turns us into a 'banana republic' where procedures and law ... are not obeyed."
PiS officials have not specified whether the helicopters from the Mielec and Swidnik factories would replace all the hardware which Airbus would have supplied or whether any new tenders would called.
Despite public signals that PiS was opposed to the Airbus deal, French officials appeared surprised by the cancellation. Discussions over the offset provisions had continued until the last minute.
Sources familiar with the discussions said the meeting to end talks lasted 10 minutes and the French had been handed a brief letter saying the offer didn't meet Poland's security interests.
$1 = 3.8193 zlotys Additional reporting by Pawel Florkiewicz in Warsaw and Tim Hepher in Paris, writing by Justyna Pawlak, editing by Larry King