by Jacob Goldstein

Lots more action in Europe today.

Germany's ban on certain forms of short selling, announced just yesterday, went into effect this morning. Other EU nations seemed surprised by the move, and said they weren't about to follow Germany's lead. The euro fell some more.

(The German ban, by the way, prohibits some "naked short selling" — something Alex Blumberg explained at length back in 2008.)

Meanwhile, some of the hedge funds that profited from the collapse of the U.S. housing boom are now betting that there will be more trouble in Europe.

"The EU and the IMF effectively went all-in with a bad hand in the highest stakes game of financial poker ever played with the world," Kyle Bass, head of Hayman Advisors, wrote in a letter to clients last week, Bloomberg News reports.

 

Bass's fund made $500 million in 2007 on the subprime collapse, Bloomberg says.

Nick Swenson, who manages a fund called Groveland Capital, started buying credit-default swaps on Spanish, Italian and Irish debt in March. He thinks the market is underestimating the chances that those countries will default on their debt. "It's asymmetric — it reminds me of the subprime trade," he told Bloomberg.

And Gennaro Pucci, who runs the Matrix PVE Global Credit fund, argues that the European bailout doesn't fix the underlying debt problems faced by many EU countries. "We're in the aftermath of a financial crisis," he said. "It's not unusual for sovereign debt to explode."

But perhaps the most famous fund manager to profit from the subprime trade — John Paulson — is less pessimistic. In a recent conference call with investors, Paulson called Europe's debt problems "manageable," Bloomberg says.