* Panetta says allowing U.S. cuts would be irresponsible
* Says across-the-board cuts could hit NATO readiness
By Adrian Croft
BRUSSELS, Feb 22 (Reuters) - European defence cuts and U.S. budget gridlock are jeopardising NATO's effectiveness, outgoing U.S. Defense Secretary Leon Panetta warned on Friday.
Leaving his last NATO ministerial meeting in Brussels, Panetta joined those warning of the effects of deep defence cuts in many Western countries and said it would be an "irresponsible act of political dysfunction" if the U.S. Congress permitted sweeping across-the-board defence cuts to take place.
Many NATO governments have responded to economic crisis and budget pressures by slashing defence spending, creating a growing gulf between U.S. and European military capabilities.
Some $46 billion in U.S. budget cuts are scheduled to take effect from March 1 that would slash nearly every U.S. military programme or activity unless Congress acts to avert them.
Panetta formally notified Congress on Wednesday that the Pentagon plans to put civilian defence employees on unpaid leave this year if the cuts take effect.
President Barack Obama's administration is pushing Congress to avert the cuts, known as sequestration.
Panetta said that if the budget cuts happened, "it could impact not only our readiness but frankly the role that we would play with regards to the readiness of NATO as well."
"There's no question that in the current budget environment, with deep cuts in European defence spending and the kind of political gridlock that we are seeing in the United States right now with regards to our own budget, (it) is putting at risk our ability to effectively act together," he told a news conference.
"As I prepare to step down as secretary of defense, I do fear that the alliance will soon be - if it is not already - stretched too thin," he said.
Panetta said he hoped Congress would not allow the across-the-board budget cuts to take place.
"I think it would be frankly a very shameful and irresponsible act of political dysfunction if in fact that were to occur. The American people would be justly outraged to have people, who they elect to office to protect them, harm them by allowing sequester to take place," he said.
Obama signed the Budget Control Act in 2011 requiring $487 billion in defence spending cuts over a decade. The law also put in place another $500 billion in mandatory, across-the-board Pentagon cuts.
The cuts were never meant to go into effect, but were intended to coerce Congress and the White House into agreeing on more selective budget reductions. That deal never happened.
Panetta's comments were reminiscent of the warning given by another departing U.S. defense secretary, Robert Gates, who said in Brussels in June 2011 that NATO risked "collective military irrelevance" unless alliance members took action to reverse declining capabilities.
Obama nominated former Republican Senator Chuck Hagel to succeed Panetta, but Republican lawmakers succeeded last week in delaying a Senate vote on confirming Hagel as defense secretary. (Additional reporting by Phil Stewart, Justyna Pawlak; Editing by Jason Webb)