May 18, 2018 / 3:55 PM / 5 months ago

Government proposal leaves markets gasping -- and Italians vaping

ROME, May 18 (Reuters) - While Italy's 5-Star Movement and League party left financial markets gasping on Friday with promises to raise government spending dramatically, users and producers of electronic cigarettes were breathing more easily.

The parties' 57-page "contract", which is supposed to underpin a new coalition government, includes two lines promising to lower levies on smokeless cigarettes to the benefit of Italy's 2 million e-smokers, and a business worth 350 million euros ($400 million) a year.

"Out with the tax on electronic cigarettes!" League leader Matteo Salvini said earlier this week in a video streamed on Facebook, before the programme had been finalised.

Salvini recently gave up smoking regular cigarettes, though he also has complained that he should not have tried to quit during the stressful government negotiations.

Current taxation has doubled the cost of liquid refills for so-called vape pens to as much as 9 euros, an industry source told Reuters.

"The League listened to us," said Gianluca Giorgetti, a supporter of the far-right party who owns Svapoart, a producer of liquids for electronic cigarettes. "Now this unjust tax must be eliminated."

The euro, bonds and stocks all tumbled due to investors' fears the contract will set Italy on a spending binge, increasing its already enormous debt pile and putting it on a collision course with European Union fiscal rules.

A new government could be finally take power next week after almost two months of stalemate following inconclusive elections.

The global science community is divided over e-cigarettes and whether or not they are a useful public health tool as a nicotine replacement therapy. ($1 = 0.8497 euros) (Writing by Steve Scherer; editing by David Stamp)

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