Sorry to bump this old thread after so much time, but my situation I posted about came to an end right now, and it may be useful for whom is interested or is in a similar situation.
I filed an "European small claim procedure" as mentioned in December 2014.
This should have took no more than three months, but hey, we are in Italy so...it took 15 monthsush:, but at the end the Court delivered its judgement: they ruled Paypal to refund my money plus my costs (so they ended up paying almost double the intial amount).
It has been sometimes "strange", even funny and laborious and tiring (sometimes it looks like the movie "The Rainmaker": me against an international law firm, their defense team was formed by FOUR lawyers!), but eventually...the satisfaction is really priceless!
Hope these infos could help if anybody is in a similar situation.
Brava to you!!! Great that you didn't give up or get discouraged !!!