If Google has operations in Italy and violate Italian laws, then they can be criminally and/or civilly liable.
Any international country must ensure they don't break local laws. If Italy decides that if you host (i.e. store) content, you are responsible for its legality. If Google feels it shouldn't censure uploads, then they may choose not to operate Youtube in Italy or similar jurisdictions.
Different sovereign nations have different ideas of what is legal and illegal. They may be contrary to what Americans may think.
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