I'll echo the thoughts on German or Japanese, reliability should be better than Italian or french - having said that an Alfa 145/146/155/156 could be had for the money and will handle/sound great while it's working You're nearly into high mile/iffy GTV's too.
I'd go for a Golf though - and get a GTi, just because you're only spending 500 notes doesn't mean you have to drive something that won't handle. Just don't get a MK3, they're pants unless it's a VR6 ;
He are some MKII's...
http://www.gumtree.com/london/70/33211970.html
http://search.autotrader.co.uk/es-uk/ww ... egLetter=H
I highly recommend Audi coupe's too, I used to own one and they're bulletproof, the 20V engine's the one to have if you can find one. Handling's OK if not great as they're a bit heavy.
Hope that helps