New defense chief Panetta sees tough budget choices

New U.S. Secretary of Defense Leon Panetta arrives at the Pentagon to begin his first day of work, before being sworn-in, in Washington July 1, 2011. Panetta, sworn in as U.S. defense secretary on Friday, said tough choices awaited him on cutting the defense budget but assured the U.S. military would remain strong.

WASHINGTON (Reuters) - Leon Panetta was sworn in as U.S. defense secretary on Friday promising to keep the military strong while making tough choices on defense spending cuts.

Panetta, who as CIA director helped oversee the operation that killed al Qaeda leader Osama bin Laden two months ago, arrives at the Pentagon at a moment of transition in the U.S. wars in Afghanistan and Iraq and intense debate over the American role in Libya.

But the budget battle may be as big a challenge as the wars he will inherit.

President Barack Obama has called on the Defense Department to come up with $400 billion in reductions over 12 years as he struggles to reduce the country's $1.4 trillion deficit and $14 trillion debt.

Panetta, in a message to U.S. forces around the world, said that would "require us all to be disciplined in how we manage taxpayer resources."

"While tough budget choices will need to be made, I do not believe in the false choice between fiscal discipline and a strong national defense. We will all work together to achieve both," Panetta said.

The 73-year-old Panetta was greeted upon arrival at the Pentagon by Marine Lieutenant General John Kelly.

Kelly was the senior military assistant to outgoing Pentagon chief Robert Gates and will continue in the powerful position under Panetta, who must oversee a faster-than-expected drawdown from Afghanistan announced by Obama last month.

About a third of the U.S. forces in Afghanistan will be withdrawn by next summer, a faster timetable than U.S. military commanders had recommended.

"Welcome aboard, sir," Kelly said, shaking Panetta's hand as stepped out of his chauffeured vehicle.

NO HOLLOWING OUT OF MILITARY

Panetta had a full first day in office, including attending a 1:30 p.m. (1730 GMT) meeting with the chairman of the Joint Chiefs of Staff and service chiefs in "The Tank," the ultra-secure Pentagon briefing room.

In a long career that included positions as White House chief of staff and budget director, Panetta was also an Army intelligence officer in the 1960s -- a point he noted in his message to troops. He promised to keep the U.S. military the strongest in the world, despite the fiscal pressures.

"There will be no hollow force on my watch," he said in his message to U.S. forces.

One of his predecessors, Donald Rumsfeld, advised Panetta in an opinion column published in The Wall Street Journal on Friday to buck Obama's request for $400 billion in cuts.

"It will be tempting to accede to the White House's proposal ... . It would also be a grievous mistake," wrote Rumsfeld, who served twice as Pentagon chief, the last time from 2001 to 2006 under former President George W. Bush.

Marion Blakey, head of the Aerospace Industries Association, warned House of Representatives Speaker John Boehner in a letter released on Friday that precipitously cutting the defense budget could make "our nation's fiscal and broader economic situation even worse."

Beyond the Afghanistan drawdown, Panetta will need to oversee the planned withdrawal of all U.S. forces from Iraq by the end of the year, even as rising violence raises questions about that country's future.

June was the deadliest month for U.S. forces in Iraq in three years, with 14 U.S. personnel killed.

Panetta told Congress last month he expected Iraq to eventually ask Washington to keep some U.S. troops in the country beyond the end-2011 deadline for their withdrawal.

He made no mention of that prediction on Friday, stressing only the need to cement a strategic relationship with the Iraqi government as "we continue our transition out of Iraq."

"It is in America's interests to help Iraq realize its potential to become a stable democracy in a vitally important region in the world," he said.

(Additional reporting by David Alexander, Editing by Xavier Briand)