The French, with one difficult problem: capturing zone in German city (7)
I believe the answer is:
leipzig
'german city' is the definition.
(I've seen this before)
'the french with one difficult problem capturing zone' is the wordplay.
'the french' becomes 'le'.
'with one' becomes 'i' (Roman numeral. I am not sure about the 'with' bit.**).
'difficult problem' becomes 'pig'.
'capturing' is an insertion indicator.
'zone' becomes 'z'.
'pig' going around 'z' is 'pzig'.
'le'+'i'+'pzig'='LEIPZIG'
'in' acts as a link.
(Other definitions for leipzig that I've seen before include "German city" , "Largest city in the Germany state of Saxony" , "City in Saxony - Wagner's birthplace" , "Populous city in Saxony, Germany" , "Industrial city of eastern Germany" .)