NATO head Anders Fogh Rasmussen called Thursday on alliance members to halt cuts in defence spending, warning that military readiness and capabilities would otherwise suffer.
With governments squeezed by tough economic times, Rasmussen said that while he fully recognised budget constraints "if defence cuts continue ... (they) will have a negative impact."
He appealed to governments to make more efficient use of the limited funds available and then reverse the cuts as the economy improves.
Rasmussen spoke as he went into a two-day NATO defence ministers meeting likely to be dominated by concerns over capabilities and progress in 'smart spending' -- making stretched budgets go further.
British Defence Minister Philip Hammond highlighted the need to get "maximum value for money" and to increase defence spending again as the economy picks up.
The United States, NATO's dominant power, has increasingly complained that European defence cuts mean it shoulders more of the burden even as Washington faces huge pressure on its own spending.
Afghanistan and NATO's planned withdrawal in 2014 will also be a major talking point at the meeting, after President Barack Obama announced last month that he would cut US troop numbers by just over half this year from 66,000.
As the troops leave, the focus is firmly on what the US and NATO role and presence will be after 2014. The plan is for a military training and advice mission but numbers have not yet been fixed in the absence of a US agreement with Kabul on the future legal status of US personnel.
Rasmussen reiterated Thursday that NATO plans were on track, with local Afghan forces due to take over the lead in combat operations in the coming months.
The meeting at NATO's Brussels headquarters has to some extent been overshadowed by developments in US domestic politics.
US Defence Secretary Leon Panetta had not expected to be making the trip but the Senate has delayed a vote on President Obama's nominee to replace him, Chuck Hagel, citing concerns over parts of his otherwise distinguished record.
"It is great to have Panetta back for a last hurrah!" said a senior NATO official.
At the same time, the withdrawal of US General John Allen, the former commander of NATO forces in Afghanistan, from consideration for Supreme Allied Commander in Europe (SACEUR) also made no difference.
The United States will in due course nominate another person for SACEUR and the process will go forward as normal, the senior NATO official said.