By Jan Strupczewski and Lidia Kelly
BRUSSELS (Reuters) - The European Commission said on Wednesday it would launch legal action against Poland over an overhaul of its judiciary that it says undermines the independence of judges and breaks EU rules, both accusations denied by Warsaw.
Poland's euroskeptic, nationalist-minded government rejected Brussels' objections as "blackmail" and unjustified criticism but said Warsaw was open to talks to resolve the dispute.
The Commission gave Poland a month to respond to concerns for the rule of law raised by the European Union executive in an unprecedented process launched last year and now aggravated by Poland's alleged politicization of the judiciary.
Polish President Andrzej Duda on Tuesday signed into law a bill giving the justice minister the power to replace heads of ordinary courts.
But in a move welcomed by Brussels, Duda also blocked two other bills that would have empowered the government and parliament to replace Supreme Court judges and most members of a high-level judicial panel.
"An independent judiciary is an essential precondition for membership in our (European) Union," Commission chief Jean-Claude Juncker said in a statement. "The EU can therefore not accept a system which allows dismissing judges at will."
"If the Polish government goes ahead with undermining the independence of the judiciary and the rule of law in Poland, we will have no other choice than to trigger Article 7," he said, referring to a legal process of suspending Poland's voting rights in the 28-nation EU.
Commission First Vice President Frans Timmermans told a news conference on Wednesday the EU executive arm could start steps to freeze Poland's voting rights before the one-month deadline if any Supreme Court judges are fired.
Warsaw dismissed the Commission objections.
"We will not tolerate any blackmail from EU officials, especially blackmails that are not based on facts," government spokesman Rafal Bochenek told state new agency PAP. "We regret that Mr. Timmermans without knowledge of the bills and Polish law comes up with a hurtful criticism of Poland."
Deputy Foreign Minister Konrad Szymanski added: "The organization of the justice system belongs to the jurisdiction of member states."
Bochenek said, however, that Poland would be receptive to talks with Brussels.
Duda's veto of the two bills followed a week of mass street protests by centrist and liberal Poles against the measures.
But Prime Minister Beata Szydlo said the government would not yield "to pressure from the street and abroad", signaling it would not abandon the plans.
Poland's right-wing government says the reforms are needed to streamline a slow, outdated legal system and make judges more accountable to the people. It has already tightened control of state media and took steps that critics said politicized the constitutional court.
Duda said on Monday he would present his own draft bills aimed at reforming the Supreme Council and National Council of the judiciary within two months.
The Commission says Warsaw's judicial reforms infringe not only its democratic constitution but also the legal foundations of EU treaties.
On Wednesday the Commission said it would send a formal letter of notice to Warsaw, the first step in a legal process that may end at the EU's top court, over the one law signed by Duda as soon as it is published in Poland's official journal.
Commission officials said previously that the Polish government's overhaul last year of the Constitutional Tribunal undermined its independence and the rule of law.
"It is time to restore the independence of the Constitutional Tribunal and to either withdraw the laws reforming the judiciary or bring them into line with the Polish constitution and with European standards on judicial independence," Timmermans said on Wednesday.
(Additional reporting by Pawel Florkiewicz, Anna Wlodarczak-Semczuk and Pawel Sobczak; Writing by Jan Strupczewski and Marcin Goettig; Editing by Philip Blenkinsop and Mark Heinrich)