Some ministers at Thursday's meeting openly opposed the move, ANSA news agency reported, with one minister dismissing it in comments to Italian television.

The shock plan, approved by his cabinet, still has to be green-lighted by G8 leaders such as US President Barack Obama, Russian counterpart Dmitry Medvedev and France's Nicolas Sarkozy, but forms part of a redevelopment strategy.

Berlusconi's idea came as Italy's government adopted a decree to release eight billion euros (10.5 billion dollars) for regional reconstruction at a special cabinet meeting in the city, the epicentre of an April 6 earthquake.

"The ministers have approved my proposal to organise the G8, which has been scheduled for La Maddalena, in L'Aquila," Berlusconi told reporters.

World leaders who had already offered to finance the restoration of churches and other damaged historic buildings "would be able to see close up for themselves the wounds inflicted on this region by the earthquake," he added.

Italy, current president of the group of eight industrialised nations, is scheduled to hold the summit -- with all its security implications -- on the Mediterranean island of La Maddalena, off the coast of Sardinia, on July 8-10.

Transport and Infrastructure Minister Altero Matteoli said the cabinet had backed the move and that Berlusconi now needed to consult other G8 leaders.

Berlusconi told reporters that relocating to the rubble-strewn city would help save money and would be a more fitting environment amid global recession.

Holding the summit in Sardinia would have cost more than 220 million euros, he said: "Why not use that for the reconstruction of the Abruzzi (region)?"

Matteoli himself seemed embarrassed, telling Italy's Sky TG24 channel that the idea was "absolutely implausible."

Planning is already well advanced to welcome the heads of state of Britain, Canada, France, Germany, Japan, Russia and the United States as well as around 25,000 officials, support staff and media.

"With all that we have spent, it seems to me difficult to move it at this stage. Frankly, I believe it will be difficult, unless someone convinces me to the contrary," said Matteoli.

Berlusconi, however, insisted that L'Aquila's military academy, venue for Thursday's cabinet meeting, "has all the space necessary to welcome all the heads of state and government, as well as the delegations and journalists."

The prime minister argued that L'Aquila actually offers security advantages.

"I don't believe that anti-globalisation protesters would have the heart to organise heavy demonstrations in a zone hit by an earthquake," he said.

Berlusconi added: "The La Maddalena complex is very fine and could host the environment summit that President Obama wants in the autumn."

He was thought to be referring to the Major Economies Forum on Energy and Climate launched by Obama at the end of March, with preparatory talks in Washington this month followed by a 17-nation summit in Italy in July.

The aim is to help hammer out a new agreement to curb greenhouse gases to replace the Kyoto Protocol when it expires in 2012.

L'Aquila's mayor Massimo Cialente said he was ready to welcome the G8.

"Obviously to organise it here would be very complicated but the city and the Abruzzi region are ready to receive the G8 however they can," he said.

While the opposition Democratic Party said Berlusconi's idea was "well-intentioned," it queried whether it had followed "reflection over the logistics" involved.

The earthquake killed nearly 300 people, damaged thousands of homes and left some 58,000 people homeless -- around 34,000 of whom are living in tents.

The decree calls for 1.5 billion euros to be spent on emergency aid and another 6.5 billion euros on reconstruction.

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