Just an update on this mess - when eBay found in favour of my Italian friend, they immediately deducted the little over $300 that was in my PayPal account at the time. However, as the total amount I have to pay is over $600, I have a negative PayPal balance of US $326.62. PayPal sent me the following message today -

"It’s very important that you add money to your balance to address this urgently. Restoring your balance allows you to use PayPal again and avoid collections actions. If you do not repay the amount owed it may be passed to a Collections Agency, which could affect your credit rating. (If you’ve already repaid your negative balance please disregard this message.)"

What should I do ? BOB