"There is a point where you are no longer cutting fat; you're cutting into muscle, and then into bone," he will say in a speech in Brussels on NATO's new "strategic concept" that was partialy released on Thursday.

NATO's 28 members are currently looking at the outline of the strategy ahead of a Lisbon summit November 19 and 20 that is due to adopt it.

Most European nations, including Britain, which topped the continent's defence budgets, have decided to slice into military spending in line with austerity programmes.

"We need reform," Rasmussen said. "Taxpayers need the best return for their investment in defence.

"In NATO we will streamline our command structure so it delivers what we need but costs less. We will also need to look at pooling scarcer resources together."

"But cuts can go too far," he warned.

Rasmussen said Europe could not afford to end up in a situation where it could no longer pull its weight, leaving the United States to look elsewhere for a security partner.

Last month, France warned that drastic defence budget cuts would leave the continent under Sino-American domination.

French Defence Minister Herve Morin said he had told European Union counterparts at a meeting in Ghent, Belgium, that plans to step up European military cooperation would falter without proper budgets.

"Most European states have given up on a simple ambition, which is that Europeans obtain a military tool allowing them to weigh on world affairs," he told reporters on the sidelines of a two-day meeting of EU defence chiefs.

"At the pace we're going, Europe is progressively becoming a protectorate, and in 50 years we will become a game in a balacing act between new powers in which we will be under a Sino-American dominion," he said.

Morin warned that "every country in the world is re-arming" while European states that already had weak military budgets before the economic crisis were proceeding with new cuts.

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