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NATO head Anders Fogh Rasmussen pressed alliance members Thursday to halt cuts to defence spending, warning that military readiness and capabilities would otherwise suffer.
With governments squeezed financially, Rasmussen said there were limits to what could be achieved through greater cooperation and 'smart spending.'
Such efforts "are an important part of the response to economic austerity ... but there is a limit to how much we can achieve that way," Rasmussen told a press conference.
"We also need a sufficient level of defence spending," he said, warning that persistent cuts could "damage severely" the ability to meet new and emerging threats.
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.
The situation could become acute next month if President Barack Obama and Congress fail to reach a budget accord.
Afghanistan and NATO's withdrawal in 2014 is also a major talking point at the meeting after 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 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.
However, it appears more work needs to be done.
Rasmussen confirmed that a June summit on Afghanistan was being considered to try and nail down more of the post-2014 details.
Significantly, a NATO official said earlier the alliance was "strongly considering a proposal" to keep the Afghan army at around 350,000 through to 2018, rather than reduce it steadily to some 230,000 once foreign troops leave.
Rasmussen confirmed too that this was being discussed, along with the budget numbers involved.
The reduction, agreed at a NATO leaders summit in Chicago last May, was meant to ease the costs involved for the allies who will otherwise continue to fund the Afghan army.
The meeting has also been overshadowed by other developments in US domestic politics.
US Defense Secretary Leon Panetta had not expected to make 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.
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) led to much speculation about who will take the post.
Reports said the new commander could be General Philip M. Breedlove, currently in charge of US Air Force units in Europe and Africa.
"Yes, that is true," one official said when asked about the report.