France will on Tuesday head off European Union proposals for a new minimum tax on wine, a measure that could deal a mortal blow to the Yes campaign in next month's referendum on the EU constitution.

Finance ministers from France and other wine producing countries, including Italy, Spain and Greece, will warn that they will veto any moves to impose minimum excise duty on wine.

The European Commission now accepts that the current zero minimum rate on wine will survive a proposed review of the way the EU taxes alcohol. ?Wine will have to stay out of the proposal,? said an EU official on Monday.

The idea of setting minimum excise taxes on wine was floated in May last year by Frits Bolkestein, former EU internal market commissioner, who is already demonised in Paris as the author of plans to liberalise Europe's market in services.

But Mr Bolkestein conceded that taking on French wine drinkers and producers might be a step too far. ?Wine taxation remains a very controversial and politically sensitive issue,? he said.

The European Commission wants to increase harmonisation of alcohol excise duties in the EU, in an attempt to tackle fraud and smuggling inside the single market.

It also believes the big variations in excise duties distort the market, although differentials in value added tax are often a more significant factor.

Finance ministers, meeting at Tuesday's Ecofin council in Luxembourg, are expected to instruct the Commission to update the 1992 deal which brought modest harmonisation of EU excise rates on alcohol.

That set minimum rates for beer, fortified wine and spirits, but left wine and sparkling wine untouched. Sweden has led demands for the minimum rates of excise duty to be increased in line with inflation they have been unchanged since 1993 in effect increasing them by over 20 per cent.

High-duty countries such as Sweden, along with beer-producing countries such as Germany and the Netherlands, argued that any review should include wine, but now admit such a move is politically impossible.

?We don't want to tax wine,? said George Alogoskoufis, Greek finance minister. ?It's not a vote-winner in countries with big wine industries like Greece, France, Italy or Spain.?

The Ecofin meeting will cover the slowdown in the eurozone economy and deteriorating public finances in countries including Italy and Portugal.

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