US Defence Secretary Leon Panetta will get a fond farewell from his Nato colleagues at a two-day meeting beginning on Thursday, as the alliance faces a difficult withdrawal from Afghanistan and looks for a new supreme military commander.

Panetta, 74, had expected to bow out earlier but his replacement, Chuck Hagel, has had a rough ride so far in the US Senate which has delayed a vote on President Barack Obama’s nominee over parts of his otherwise distinguished record.“It is great to have Panetta back for a last hurrah!” said a senior Nato official, dismissing any suggestion that Hagel’s delayed nomination presented a problem.

By the same token, the withdrawal of US General John Allen, the former commander of Nato forces in Afghanistan, from consideration for Supreme Allied Commander in Europe (SACEUR) also made no difference.The United States will in due course nominate another person for SACEUR and the process will go forward as normal, the senior Nato official said.

The two-day defence ministers meeting will focus on capabilities and review progress in ‘smart spending’ — making stretched budgets go further as costs rise and governments are under intense pressure to cut spending so as to balance their finances.Washington complains that as a result it has ended up shouldering ever more of the burden as its European allies have slashed defence expenditure, to the detriment of their military capabilities.

Europe must do more, the senior Nato official said, adding that the cuts should be reversed as soon as the economy picks up.Nato head Anders Fogh Rasmussen recently warned the 28-member alliance of the seriousness of the budget problem and especially the growing imbalance between Washington and the rest.“Defence spending among the allies is increasingly uneven, not just between North America and Europe, but also among European allies,” Rasmussen said late last month.

Afghanistan and Nato’s planned withdrawal in 2014 will be a major talking point at the meeting, after President Obama announced last month that he would cut US troop numbers by just over half this year from 66,000.The big question concerns what the US and Nato role and presence will be after 2014 — the plan is for a military training and advice mission but numbers have not yet been fixed in the absence of a US agreement with Kabul on the future legal status of US personnel.

The senior Nato official insisted that such talks had to be expected to take some time.This is a very complicated negotiation as it goes to the heart of sovereignty,” the official said, adding that “no one in the alliance” had expected Washington to have reached an agreement by now with Kabul.