Country bar plugs retro-Xmas (7)
I believe the answer is:
lebanon
'country' is the definition.
(I know that Lebanon is a country)
'bar plugs retro-xmas' is the wordplay.
'bar' becomes 'ban' (both can mean to outlaw or block).
'plugs' is an insertion indicator (plug can mean to fill a gap).
'retro' shows that the letters should be reversed in order (retro is Latin for 'backwards').
'xmas' becomes 'noel' (I've seen this before).
'noel' back-to-front is 'leon'.
'ban' going within 'leon' is 'LEBANON'.
(Other definitions for lebanon that I've seen before include "Neighbour of Israel" , "Eastern Mediterranean country" , "Middle East country" , "Ban Noel from the country" , "Nab Noel in eastern Med. country" .)