UPDATE 2-Lebanon president urges 2019 budget deal as veterans protest

Lebanon's president called on Tuesday for approval of the 2019 draft budget by the end of May in order to launch long-stalled economic reforms, though military veterans fearing pension cuts took to the streets. Wrestling with one of the world's heaviest public debt burdens and years of low growth, the Lebanese government has promised reforms which economists deem more pressing than ever.

But it risks facing public anger at any cuts to the massive public wage bill, which also includes pensions and benefits and is the state's biggest expense. Retired army officers protested as ministers convened at the presidential palace to start debating the budget.

"President (Michel) Aoun urged hurrying up discussions on the budget so that it is approved in parliament before the end of next month," his office tweeted. As well as the bloated public sector, state finances are also strained by high debt servicing costs and hefty subsidies in the power sector.

Promised reforms include starting work to reduce the deficit in the state-subsidised power sector and managing public debt to reduce its cost, as well as reducing waste and corruption. Prime Minister Saad al-Hariri has said Lebanon faces "catastrophe" if the coalition government - formed in late January after months of negotiations - does not agree what may be the most austere budget in its history.

It will be "extremely difficult" for politicians to agree on enough austerity measures which are deeply unpopular, said Jason Tuvey, Middle East Economist at Capital Economics. "We still think the Lebanese authorities will ultimately be forced to turn to some sort of debt restructuring."

In Tuesday's protest, a few hundred veterans gathered in front of the central bank, the finance ministry, and Beirut port on Tuesday, rallying against any potential cuts to their pensions. "This is our right, our sweat and blood," former sergeant major Khodr Noureddine said. "Our salaries can't even feed us for a day, there's no school funding, no good healthcare."

A spokesman for the protesters, retired brigadier general Ali Omar, vowed they would remain in the streets to ensure they keep their pensions. He said cuts would hit tens of thousands of people, including wounded or handicapped soldiers, and families of killed soldiers. (Additional reporting by Issam Abdallah Editing by Andrew Heavens, Susan Fenton and Andrew Cawthorne)