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America is weaker as a result of shutdown: Panetta

The United States must stop sending a message of weakness to the rest of the world, former Defense Secretary Leon Panetta said Wednesday.

In an interview on CNBC, Panetta said the impact of the U.S. government shutdown on the American people, the economy and national defense has not gone unnoticed.

"We've sent a message to the world that America is weaker as a result of that," Panetta said. "We can't repair the damage here. Clearly at this point the world is looking at the United States and asking the question. 'Can we effectively govern ourselves?'"

Panetta said it is time for Congress to do the right thing: End the shutdown, extend the debt limit and get to work on the budget.

(Read more: Reid: Deal reached on ceiling—for now)

"The time now has come to recognize that this country needs to be governed," he said. "The message we're sending to the world is that America is having a hard time governing our democracy. We need to end that message and get back to governing."

As chief of staff to President Bill Clinton, Panetta said he discovered the importance of governing in the 1994 U.S. government shutdown. He called that shutdown a "stupid thing to do."

"Hurting the American people is not smart politically," he said. "My experience is that this is very much a human process. The president and the leadership in the Congress have to continue to work together, and they've got to be able to do it in a way in which they can be honest with each other and ultimately find consensus."

A veteran to both the Obama administration and the House of Representatives, Panetta did not single out a group to blame for the stalemate.

"We've been through a rough period here," he said. "It is mean in Washington. We've seen an awful lot of partisan gridlock. Everybody bears some responsibility for that."

(Read more: Buffett: Debt limit is 'political weapon of mass destruction')

Panetta urged the president and Congress to reach a consensus on reforms including entitlements, discretionary spending and revenue.

"We've got to be able to put together the kind of package that will not only deal with the deficit but replace sequester. That's the next challenge. Is it going to be tough? You bet it's going to be tough. Does it need to get done? Yes it does."

—By Elizabeth Schulze, CNBC desk producer. Follow her on Twitter @eschulze9

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