US Defense Secretary Leon Panetta on Wednesday welcomed a deal to avert automatic budget cuts that would have slashed military spending and caused "damaging" consequences.

But the Pentagon chief urged more decisive action from Congress to remove the threat of mandatory cuts to defense spending that could be triggered in two months if lawmakers fail to break a stalemate over how to reduce the federal budget deficit.

"Had Congress not acted, the Department of Defense -- along with other federal agencies -- would have been forced to begin taking dramatic steps that would have severely impacted our civilian personnel and disrupted our mission," Panetta said in a statement.

He said he had warned for more than a year of the potentially disastrous impact if the automatic budget cuts, or sequestration, had gone ahead.

"Over the past few weeks, as we were forced to begin preparing to implement this law, my concerns about its damaging effects have only grown," he said.

Until the last-minute agreement was approved on Tuesday, Panetta said he was poised to notify the Pentagon's 800,000 civilian employees of possible rolling furloughs to absorb the budget cuts.

"Congress has prevented the worst possible outcome by delaying sequestration for two months. Unfortunately, the cloud of sequestration remains.

"The responsibility now is to eliminate it as a threat by enacting balanced deficit reduction," he said.

The Defense Department was already "doing its part" by cutting back planned spending by $487 billion over the next ten years but the "specter" of automatic cuts of another $500 billion over the next decade had made it difficult to make budget plans, he said.

"We need to have stability in our future budgets."

Congress voted overnight on a stop-gap agreement that avoided across-the-board tax hikes and automatic spending cuts that had threatened to drive America back into recession.

The agreement, a political victory for President Barack Obama's White House, raised taxes on the very rich and delayed the threat of $109 billion in automatic spending cuts for two months.

If the mandatory cuts were to enter into force, the Pentagon would be forced to scale back training for troops, slash spending for spy agencies, cancel purchases of some weapons and issue furloughs to large numbers of its vast civilian workforce, officials said.

The defense cuts amount to at least $52.3 billion for 2013 -- or about 10 percent across all the armed services -- under mandatory budget reductions, which were designed to be so drastic that Congress would reach a compromise to avoid heading over the "fiscal cliff."

If the automatic cuts go into effect in two months' time, the impact would be even more dramatic as a larger portion of the defense budget for fiscal year 2013 would be spent by then, officials said.

Some skeptics say the Pentagon and the defense industry have overstated the impact of the mandatory budget cuts, and that America's massive military spending needs to be trimmed back.