The shop have almost definitely refunded exactly what they received.
Whereas what they're legally obliged to do is refund the amount the customer paid. If it was a UK shop I'm assuming most people wouldn't be happy receiving a refund of the money they paid less the card transaction fee.
Are you saying the German shop is legally obliged to cover an intermediary's (Paypal's) FX margin on both conversions here? Rather than e.g. Paypal doing so? I have to say I don't believe you.
Whereas what they're legally obliged to do is refund the amount the customer paid. If it was a UK shop I'm assuming most people wouldn't be happy receiving a refund of the money they paid less the card transaction fee.