I wonder how the same hotel owner would react if you emailed him and told him you made a mistake reading the amount while booking, and because of this you intend to pay 40 euro less for your stay...
Since you booked it on booking.com the first thing you need to do is to contact booking.com (which you already did) and tell them to accommodate you according to your prepaid booking. You have no interest to be an intermediate between hotel and booking.com. If they cannot accommodate you to this specific hotel - ok, this happens, but in this case they shall accommodate you to a similar location/quality hotel for the original price. Insist to talk to supervisor if the customer care representative is uncooperative.
If they do not cooperate, tell them in this case you will find a similar hotel yourself (using your own definition of what is similar) - and then charge them for the difference between bookings. If they refuse, you would sue them in court. Have to say that my experience with them was generally pleasant; I only had to go once through this routine a few years ago, and was promptly accommodated by supervisor.
Another option you have is to sue the hotel. In many countries the laws bind businesses to honor advertised prices, even if they were posted by mistake. The exceptions are generally limited to "obvious mistakes" - such as 40 cents a night booking. Telling the hotel you intend to sue them might make them more cooperative, and the law might provide for additional damages and even attorney fees. Note that in your case the hotel didn't seem to act in good faith - an e-mail notification sent 12 hours before the reservation could hardly be seen as good faith.
You might also need to explain them that if they posted the "correct" price, you would not stay there, and would find a comparable accommodation. In this case instead of making 40 euro more they might possibly end up with no booking at all. While this is not strictly necessary and doesn't relieve them from their obligations, this would help present it as a valid business dispute and not just a temper tantrum.