The Pentagon chief spoke after the Republican-led House Armed Services Committee approved a defense budget that added funds for a study on a possible East Coast missile defense site and for modernizing US Navy cruisers that were due to be retired.

The panel approved a bill for a base defense budget of $554 billion, which committee Chairman Buck McKeon says is about $4 billion more than what President Barack Obama's administration wants to be spent for fiscal 2013 in order to meet cost-cutting targets.

The lawmakers also authorized $88.5 billion for the war in Afghanistan and other counterterrorism efforts, in line with the Pentagon's request.

"My concern is that if Congress now tries to reverse many of the tough decisions that we reached by adding several billion dollars to the president's budget request, then they risk... potential gridlock, because it's not likely that the Senate will go along with what the House did," Panetta told reporters.

He warned that the bill, which must be voted by the entire House before heading to the Democrat-led Senate, "could force the kind of trade-offs that could jeopardize our national defense."

The chairman of the Joint Chiefs of Staff, General Martin Dempsey, said the committee's extra funding for a study on a possible new missile defense site on the US East Coast was not necessary.

"In my military judgment, the program of record for ballistic missile defense for the homeland, as we've submitted it, is adequate and sufficient to the task," he said.

"I don't see a need beyond what we've submitted in the last budget."

Fiscal pressure has forced military chiefs to scale back projected spending by $487 billion over the next decade, a task they have described as tough but manageable.

But a threat of dramatic defense cuts also looms on the political horizon.

If Congress fails to agree by January 2013 on how to slash the deficit, dramatic defense reductions of about $500 billion would be automatically triggered under a law adopted last year.

"The Department of Defense and I believe the administration are not going to support additional funds that come at the expense of other critical national security priorities," Panetta said, warning that "there is no free lunch here."

"And if members try to restore their favorite programs without regard to an overall strategy the cuts will have to come from areas that could impact overall readiness."

The panel's bill also cancels an increase in military health care benefits.

First quarter sales, not including its stake in French naval contractor DCNS, slipped to 2.48 billion euros ($3.21 billion) from the year-earlier 2.51 billion euros.

However orders, again excluding DCNS, jumped 33 percent to 2.58 billion euros.

"At the end of this first quarter, our order intake is up, supported by major contracts in transport and the continued positive momentum of civil aeronautics," Thales chief executive Luc Vigneron said in a statement.

"On this basis ... Thales is confirming its objectives for 2012."

The company forecasts an operating margin of 6.0 percent in 2012.

Thales posted a 2011 net profit of 566 million euros, erasing losses of 128 million euros in 2009 and 45 million euros in 2010.

Australia touts defence spending despite cuts
Sydney (AFP) May 10, 2012 - Australian Defence Minister Stephen Smith defended Canberra's military spending as "far greater" than its regional neighbours Thursday after an Aus$5.5 (US$5.55) billion budget cut.

Smith said Australia would spend Aus$103.3 billion on defence over the next four years, maintaining "Australia's status in the top 15 nations in terms of world defence expenditure".

"In real dollar terms, we spend far greater than any of our regional neighbours," he said.

The remarks were made as Smith announced the Aus$1.4 billion purchase of 10 Italian Alenia C-27J Spartan Battlefield Airlift aircraft to replace Australia's ageing Caribou fleet, which were retired from service in 2009.

He said it demonstrated the government's commitment to a strong airforce capability -- "a critical element of our national security capability even in times of fiscal difficulty".

Defence was the major target of aggressive government spending cuts worth some $33.6 billion unveiled in this week's budget, with the deferral of 12 F-35 Joint Strike Fighter jets and 35 self-propelled howitzer artillery pieces.

Other projects were also delayed or cancelled and 1,000 civilian staff sacked, just weeks after the first of 2,500 US Marines to be stationed in northern Australia under a new military pact began their posting.

US President Barack Obama and Australian leader Julia Gillard unveiled the major expansion of military ties late last year, in a move designed to bolster Washington's presence in the region, which irked Beijing.

Smith said the C-27J had missile-warning systems, electronic self-protection, secure communications and battlefield armour allowing it to operate in "high-threat" environments.

It was selected ahead of the Airbus Military C295 and could undertake a "wide range of missions from delivering ammunition to front line troops to undertaking aero-medical evacuation of casualties", said Smith.

The first deliveries would be taken in 2015 through a foreign military sales agreement with the US, with a separate contract to be struck with Alenia for the operation, maintenance and modification of the fleet.