The European Court of Justice has censured the Italian government for imposing restrictions on the right of students from other European Union states to live and study in Italy.
It found that restrictions were in breach of EU freedom of movement laws and conflicted with an October 1993 directive on the right of residence for students and their families.
The decision opens the way for the European Commission to demand that Italian student immigration regulations are liberalised. It launched the case at the ECJ, objecting to Rome's insistence that students who are citizens of other member states must "have resources of a certain amount" to gain the right of residence in Italy.
The commission also contested an Italian law that prevents students from elsewhere in the EU from claiming residency when they are accompanied by members of their family.
The court said that under the directive, the conditions for obtaining a right of residence "do not include any requirement to have resources of a specific amount".
Instead, it referred to a general requirement that a student has "to assure the national authority concerned that he has, for himself and, in appropriate cases, for his spouse and dependent children, resources to avoid becoming a burden on the social assistance system of the host member state".
The ECJ said "the Italian Republic has failed to fulfil its obligations".
It is not the first time Italy has fallen foul of the ECJ, which has twice ruled that its treatment of foreign language lecturers in state universities conflicted with European law. A third case is pending.