The U.S. military is considering further reducing its nuclear arsenal to cut a $450 billion black hold in its budget, the defense secretary has admitted.

Secretary Leon Panetta said he was looking at slashing the number of warheads from the current total of around 5,100, which is expected to cost $600 billion to maintain over the next decade.

He also revealed that troops may be pulled out of Europe to focus on bolstering the military presence in the Middle East and Asia.

And retired soldiers could get less generous pensions and have to pay more for their health care, despite having been hit with increases of 12 per cent this year already.

In an interview with the New York Times Mr Panetta said that even though his budget was being slashed he would maintain spending on areas he deemed to be vital.