Silvio Berlusconi said today that he would move the G8 summit in July from Sardinia to L'Aquila, the centre of the Abruzzo earthquake, and divert the money saved to help reconstruction of the stricken region.

After holding a Cabinet meeting in L'Aquila for the second time since the April 6 earthquake, Mr Berlusconi said that the cost of holding the summit on the Sardinian island of La Maddalena would have been €220 million (£196 million), money better spent on reconstruction efforts in Abruzzo.

The earthquake killed 295 people, drove 50,000 from their homes, and damaged or destroyed medieval and modern buildings in and around L'Aquila. Mr Berlusconi, the current G8 chairman, insisted that despite the earthquake damage there were enough hotels and conference venues for the delegations and journalists.

He said that the summit would be hosted at the Finance Police barracks, which has been turned into the headquarters for the emergency services, and where a mass funeral for the earthquake victims was held. The G8 event would put L'Aquila "in the centre of world attention", he said.

Officials said that the change of venue, approved at today's Cabinet meeting, was subject to approval by the other G8 countries – Britain, the United States, Russia, Germany, Japan, Britain, France and Canada.

Reports in Italy suggested that Mr Berlusconi had a hidden motive, namely that the Government was struggling to get La Maddalena, a former US naval base, ready in time for the summit, and to find cruise ships to house delegations and the press. Mr Berlusconi's office dismissed the reports as untrue.

La Maddalena was chosen partly to ensure that the G8 was not marred by the kind of violent protests seen at the G7 summit in Genoa in 2001 and more recently at the G20 in London. However, Mr Berlusconi said that protesters would think twice before marching on an earthquake zone. "I don't think they would have the desire, gall or heart to demonstrate here," he said.

He said La Maddalena was a beautiful complex that could be used for the environmental summit which President Obama hoped to see held in the autumn. However, Bobo Craxi, leader of the opposition Socialist Party and son of the late former prime minister Bettino Craxi, accused Mr Berlusconi of regarding international meetings as either "beauty pageants or showcases for disasters".

The Cabinet drew up a decree setting aside €8.5 billion for reconstruction in Abruzzo, €1.5 billion of which is assigned to emergency measures. The Cabinet ruled out imposing a special tax on cigarettes or petrol to pay for the aid. It is not clear how the money will be raised, but reports said that Mr Berlusconi would draw on government emergency funds as well as EU funds and the national lottery.

Those whose businesses have been affected by the earthquake will receive €800 a month in compensation for a period of up to 120 days.

Mr Berlusconi has accused magistrates in L'Aquila of focusing excessively on investigations into shoddy construction rather than giving priority to rebuilding. However, Gianfranco Fini, the Speaker of the Lower House and a fellow leader of the ruling centre-right People of Liberty alliance disagreed, saying it was right to establish responsibility for the collapse of buildings which should have been earthquake proof, including a student hostel where eight students died and a wing of the hospital.

Fine weather returned to Abruzzo today after days of rain and cold which have aggravated the plight of the tens of thousands of evacuees living in temporary tent cities around L'Aquila.

The Government said this week that it had drawn up a list of heritage sites damaged by the earthquake in Abruzzo which it hopes foreign governments will "adopt" and repair. Mr Berlusconi proposed the adoption scheme while visiting the earthquake zone last week, describing it as a ''sort of wedding gifts list''.

Luciano Marchetti, the civil protection official in charge of the scheme, said that he had chosen 45 sites, which would be reduced to 38 by Sandro Bondi, the Culture Minister. The monuments on the list include L'Aquila's 16th-century Spanish castle, the Fortezza Spagnola, which the Spanish goverment has already offered to restore. The castle houses the National Museum of Abruzzo, from which rescue workers have salvaged 200 paintings, sculptures and other art objects.

Also up for adoption is the 13th-century Basilica of Santa Maria di Collemaggio, which was the site of the coronation of Pope Celestine V in 1294 and contains his tomb, and L'Aquila's largest Renaissance church, San Bernardino da Siena. Pope Benedict XVI is to visit the earthquake zone next Tuesday.

Mr Berlusconi, who has visited the earthquake zone daily, overseeing rescue work and encouraging the survivors, promised that three quarters of homes in the L'Aquila zone would be habitable within a month. He said that 57 per cent of homes were already habitable, and another 19 per cent would be after work which should take less than a month. The number of homeless is estimated at nearly 58,000, of whom 34,000 are living in tent camps.

A poll in the Corriere della Sera newspaper said that most Italians judged Mr Berlusconi's handling of the crisis positively. Forty-eight per cent of those polled said that they had more confidence in Mr Berlusconi than before, and 30 per cent said their confidence in him had not changed. Just 6 per cent said that they had less confidence in him than before and 11 per cent retained their negative view of the Prime Minister.

Mr Berlusconi held several Cabinet meetings in Naples while tackling the rubbish crisis there, and at one stage suggested the city as an alternative venue for the July G8 summit.

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