A free trade agreement between South Africa and the European Union - promised to Nelson Mandela when he toured Europe after the end of apartheid - is on the verge of collapse

The $17bn deal - which was supposed to come into effect on 1 January -is being blocked by a dispute over whether South African wine producers have the right to use terms such as "grappa" and "ouzo".

Now the European Union says the whole deal could be postponed for weeks.

EC foreign ministers have asked the European Commission to try and renegotiate a side deal on wine and spirits which is currently deadlocked.

Italian veto

The Italian Government says it will not ratify the free trade agreement if South African producers continue to sell the grape spirit, grappa, in Europe.

Greece has also threatened to veto the deal if South Africa continues to produce its version of the spirit ouzo.

The Italians and the Greeks say it is a matter of principle. They will not tolerate South African wine producers marketing their own version of two liqueurs which are part of the history of Mediterranean spirit production.

South Africa argues that it was legitimate to give trademark protection to geographical areas such as "port" and "sherry", but did not agree with the EU that other names such as "grappa" and "ouzo" should also enjoy protection.

"This is not an issue of major commercial significance to South Africa. But it is an issue of principle," a South African official said.

Schnappa solution?

While EU lawyers are examining this conundrum, South African wine producers have been seeking a practical solution to the impasse.

The chairman of South Africa's grappa producing association, Georgio dalla Cia, has now offered to drop the Italian name of the spirit.

Mr dalla Cia has proposed that South Africans should now call their product "schnappa", a move which would resolve one part of the dispute.

There are only three vineyards producing grappa in the whole of South Africa. Their total output is less than 30,000 bottles a year.

Storm over port

Our Southern Africa correspondent Greg Barrow says South Africans are frustrated by what they perceive to be foot-dragging by EU member states who never wanted the free trade deal in the first place.

This is not the first time that alcohol terminology has threatened to derail the deal, which South Africa and the EU signed in October after four years of negotiations.

Spain and Portugal earlier objected to South African winemakers' use of the terms "port" and "sherry".

The agreement will liberalise nearly 90% of trade between the EU's 15 member states and South Africa.

It will lift customs duties from 86% of EU exports to South Africa over a 12-year period, and custom duties from 95% of South African exports to the EU over 10 years.