Thousands of people gathered Tuesday for the funerals of an extended family killed in Sicily when a flash flood engulfed their villa during devastating storms that wreaked havoc across Italy.

Vast crowds applauded in respect in the streets of Palermo as the coffins of the nine victims, including two toddlers, were carried to the city's cathedral, where mourners clutched white balloons.

"Palermo weeps", and "Sicily, rise up and fight!" read banners hung on nearby shopfronts, as anger grew on the Italian island over illegally built housing, which police say was to blame for the deaths.

The family drowned overnight Saturday after a swollen river on a plain near the coastal town of Casteldaccia submerged their holiday villa in water and mud in seconds, leaving them no chance for escape.

- Buried with toys -

Survivor Giuseppe Giordano, 35, who did not own the villa but stayed there often, lost his wife, two children, his parents, brother, and sister, his nephew and the boy's grandmother.

He wept as he embraced their coffins at the altar of a packed Palermo cathedral.

Photos and videos taken by an aunt who had been to the house earlier that day show the family tucking into a sumptuous All Souls' Day meal, before the children opened their presents -- a Sicilian tradition in remembrance of the dead.

"Singing, dancing, simply spending time together. That's what the villa meant for us," aunt Daniela told La Repubblica daily.

One-year old Rachele Giordana will be buried along with the Mickey and Minnie Mouse toys she had been given.

The villa had been built too close to the river, violating safety norms, and the owners had been ordered to demolish it in 2008, according to Sicilian prosecutor Ambrogio Cartosio.

All 12 villas built on the plain near Casteldaccia are unauthorised, but residents say they know to leave when the rains come.

Out of every 100 new builds in Italy, almost 20 are illegal, according to the national statistics institute (ISTAT).

Councils are obliged to knock properties down if the owners ignore the wrecking ball order, but they often lack the resources to do so.

- Red weather alert -

"It's easier to sentence a mafioso to life in jail than knock down a house," Cartosio said, calling for a special fund from the state to pay for demolitions.

The villa's owner, Antonino Pace, told La Repubblica the house had flooded 10 years ago, destroying everything he owned.

He moved away, but was loathe to bulldoze the villa and he let the Giordanos use it for free instead, he said.

"I warned them only to go in summer. There was a red weather alert on Saturday, everyone knew that," he added.

But Giuseppe Giordano's cousin told media the villa had been rented to them by Pace and that he had not warned them.

Heavy rains continued to lash northern Italy on Tuesday, with swollen rivers and Lake Maggiore, the country's second largest lake, close to overflowing.

According to Italy's Environment Minister Sergio Costa, 7.5 million Italians live in areas at risk from bad weather events.

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