Eight more councillors backed the view of 11 of their colleague who initiated the veto vote by arguing that the act created a serious moral hazard and that it would cause serious damage to state assets.

The proponents of the veto, including economist Jože Mencinger, and unionists Branimir Štrukelj, Lidija Jerkič and Drago Ščernjavič, moreover argued that the bad bank proposed was the most expensive solution to the problem of banks' bad loans, and that many elements of the act could be unconstitutional and incompatible with existing laws.

The bad bank act was adopted last week and carries a potential cost of EUR 4bn in state bonds issued in exchange for the non-performing loans. An additional EUR 1.5bn could be spent on subsequent capital increases.

Proponents of the veto said the act transferred misguided past decision of managements and supervisors at banks onto the shoulders on taxpayers, failed to specify bad loans and evaluation criteria, and exempted the bad bank of any accountability to parliament and the public.

They noted that at least 10% of the assets obtained will have to be sold by the state-owned entity each year and that given the circumstances, this will have to be done at low prices, which will cause grave damage to state's assets.

On top of the veto, the act is being targeted by a referendum initiative, as the trade Union of Chemical, Non-Metal and Rubber Industries of Slovenia (KNG) filed today the 2,500 signatures needed to launch referendum proceedings.

The union wants explanations from the government regarding its plans for the industry, stressing that some of its biggest companies will be implicated in the bad bank as a result of company shares seized by banks as collateral.