Giovanni Navarro's brace was enough for the hosts in Madrid, despite Riccardo Cappa's second half strike.
The result, coupled with Chelsea's victory over Qarabag elsewhere earlier in the day, means Alberto De Rossi's side can no longer progress to the knockout stages of the competition.
The Under-19s still have one game remaining in the group, as they host Qarabag at Stadio Tre Fontane on Matchday 6.
See more photos from the game in the gallery below.
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