The US defense chief warned NATO allies on Wednesday that they can no longer depend on the United States to make up for the type of military shortfalls witnessed in the Libyan and Afghan wars.

With the US military facing its own major budget cuts, Defense Secretary Leon Panetta called on European and Canadian allies to work closely to pool resources at a time of austerity biting on both sides of the Atlantic.

"As for the United States, many might assume that the United States defence budget is so large it can absorb and cover alliance shortcomings - but make no mistake about it, we are facing dramatic cuts with real implications for alliance capability," he said in a speech in Brussels.

Panetta delivered his warning before talks with NATO counterparts, centred on the missions in Libya and Afghanistan as well as the weaknesses the alliance experienced in the conflicts.

Although US defence spending far exceeds European budgets, Panetta said American military leaders were facing $450 billion in cuts over 10 years, which he called tough but "manageable".

But if the US Congress fails to tackle the country's deficit this year, the Pentagon "could face additional cuts in defense ... (that) would be devastating to our national security and to yours as well".

The cuts contemplated by the Pentagon would reduce the size of the force and curtail some weapons programmes, but the gargantuan US defence budget -- at nearly $700 billion -- still dwarfs that of the 27 other NATO members combined.

NATO defence ministers agreed to focus on multinational cooperation to make better use of resources and the alliance will identify projects at a summit in Chicago next year, said NATO Secretary General Anders Fogh Rasmussen.

German Defence Minister Thomas de Maiziere, however, said it would be tricky for Europeans to make up for "what the Americans can't afford any longer for our common security, but we must concentrate on what is really necessary".

"The important thing is - even if it sounds difficult - to become smaller but more effective," he said.

US officials have long urged European allies to shoulder more of the burden of the alliance. Panetta stressed that a new era of austerity would require member states to coordinate budget cuts to ease the impact on NATO.

"We cannot afford for countries to make decisions about force reductions in a vacuum, leaving neighbors and allies in the dark," Panetta said at an event organised by the think tank Carnegie Europe.

In his first speech in Europe since taking over as defence secretary in July, Panetta struck a gentler tone than his predecessor, Robert Gates, who delivered a harsh rebuke to the alliance in June before his retirement.

While Gates painted a bleak picture of an alliance on the verge of "irrelevance" after failing to invest in defence, Panetta praised NATO for its "extraordinary" performances in Libya and Afghanistan.

"With the fall of the Kadhafi regime, our nations saw an example of why NATO matters, and why it remains indispensable to confronting the security challenges of today," he said.

In the Libya air war, NATO proved it could make moves swiftly, effectively, and with Europeans -- instead of Americans -- playing the lead role in a major operation, he said.

But the Libyan and Afghan conflicts exposed worrisome gaps in alliance capabilities, including a shortage of drones, refuelling tanker aircraft, helicopters, munitions and targeting specialists, he said.

Rasmussen told reporters that alliance ministers agreed the Libya mission had been a "great success" and would discuss on Thursday "the prospects for ending the mission".

But, he said, "the success depended on the unique and essential capacities that only the United States could provide".

Panetta later announced a deal with Spanish Prime Minister Jose Luis Rodriguez Zapatero in which Spain will host four US ships armed with interceptors to bolster's NATO's planned missile shield.

"We are committed to our defence relationship with Europe even as we face growing budget constraints at home," he told a news conference.