Leon Panetta will be sworn in as US defence secretary on Friday at a private ceremony at the Pentagon, where a looming budget battle may be as big a challenge as the wars he will inherit.

Leon Panetta will be sworn in as US defence secretary on Friday at a private ceremony at the Pentagon, where a looming budget battle may be as big a challenge as the wars he will inherit.

Panetta, who is scheduled to arrive at the Pentagon at 8:30am EDT (1230 GMT) and take the oath of office 15 minutes later, has served as CIA director for the past two and a half years, at a

time when the lines between US covert and military operations have blurred. He comes to the Pentagon two months after a covert raid killed Osama bin Laden in Pakistan, and a week after

personnel and troops at a time when pressures to cut defense spending in Washington has raised concerns about a possible hollowing out of the US military, despite the wars in Afghanistan and

Iraq and operations in support of the NATO mission in Libya. "The budget will be an important item on his agenda. He will take that very seriously," said Douglas Wilson, assistant

secretary of defence for public affairs. "He knows that there are difficult decisions to be made. He has said publicly and he will say again that he intends that there will be no

hollow force on his watch." Obama has called on the defence 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. In an interview with Reuters this week, outgoing defence secretary Robert Gates said military spending was not the cause of the budget deficit. Even a

"disastrous" 10 percent cut would reduce the budget shortfall only by some $50 billion -- about 4 per cent, he noted. "We are not the problem," said Gates, who is

retiring after four and a half years in the job.