* Retired soldiers occupy sidewalk, block road
* Suspend action to await results of cabinet debates
* But say protests to continue until budget solution
* Government planning to trim state spending to cut debt (Adds cabinet session ending)
BEIRUT, May 13 (Reuters) - Retired Lebanese soldiers blockaded the central bank on Monday to warn the government against curbing their benefits in an escalation of protests against plans to cut state spending.
The veterans suspended their day-long protest after meeting the defence minister, awaiting the results of cabinet debates to decide if they will remain in the streets, a spokesman said.
A central bank official told Reuters the central bank operated as normal despite the protest outside its Beirut headquarters. The demonstrators also blocked the main road outside the building, a major traffic artery.
With Lebanon suffering from years of low economic growth, long-stalled reforms are seen as more pressing than ever to put the state finances on a sustainable path.
The government is seeking to finalise a budget that Prime Minister Saad al-Hariri says may be the most austere in Lebanese history. The veterans fear their pensions could be cut.
The military and central bank have been seen as two pillars of Lebanon's stability since the end of its 1975-90 civil war.
Lebanon has one of the world's heaviest public debt burdens at around 150 percent of GDP.
Though all of Lebanon's main parties agree on the need to reform, a slew of strikes by state employees including central bank workers last week point to the minefield they face.
"To avoid cutting roads and hitting people's livelihoods, we have decided to suspend the protest for now," retired brigadier general Sami Rammah told Reuters.
The cabinet wound up its meeting in the evening without getting to issues concerning the army, and will convene again on Tuesday, ministers said.
Demonstrators sat peacefully on the pavement outside the central bank, some of them holding the Lebanese flag.
"We will escalate...until we paralyse all of Lebanon ... we will cut all the streets...a revolution will happen if it has to," said 57-year-old protester Zeghayb Zeghayb.
Another cited disruption caused by the central bank workers' strike last week as the reason for targeting the institution. "We thought that this is the best way" to pressure the government, said Maroon Badr, 60.
Veterans also protested outside regional offices of the central bank in the cities of Tripoli and Tyre.
Hariri said last week Lebanon was a long way from bankruptcy but failure to pass a "realistic" budget would be tantamount to a "suicide operation" against the economy.
He has been critical of protests against the draft budget, saying last week they were based on unfounded rumours.
The public sector wage bill is the government's biggest expense followed by debt servicing costs and the big subsidies paid annually to the state-owned power producer.
The draft budget aims to reduce the deficit to below 9% of GDP from 11.2% in 2018, the finance minister has said.
As part of the draft budget, the government has approved increasing the tax on interest payments to 10% from 7% despite objections from the chairman of the Lebanese banking sector.
"It's a very bad move. It will lead to an economic contraction," said Nassib Ghobril, chief economist at Lebanon's Byblos Bank. The repercussions would include increased interest rates that would further discourage borrowing and investment. (Additional reporting by Ellen Francis, Tom Perry and Laila Bassam Editing by Tom Perry and Mark Heinrich)