This is known and fixed in the new build of 1.3, which should be up Monday.

Thanks. Is there some way of "shrinking" the save game before monday?

Nope, once a save game baloons to the point that it crashes on load, it's ruined, unfortunately.

I wonder what exeactly causes the balooning process - from what i saw it was load -> reload, although I'm not sure. Right now I have one that balooned to 48 mb the question is: when the patch comes out - is it going to shrink back to normal size or just stop growing?

In one of the posts it was mentioned that you'll have to start a new game with beta2 to prevent the memory leak/balooning.

this was a new game and not a load from 1.2. Besides, it seems that it is something inside the game that causes balooning as sometimes going back 2 -3 (pre leak event) would solve it.

The balooning/memory leak is a confirmed bug in 1.3 beta 1.
Which version are you playing?

1.3 b1.
I understand it was a confirmed bug, what i was trying to understand is what actually leads to it (i.e. a set of your actions or some arbitrary AI stuff) I have played one game completely without it showing up and another is unplayable.
Well, it is getting fixed tomorrow anyway...

It is my understanding that it comes from each save. The more it is saved (autosave) the larger it grows. Not sure if that is the actual case though.

I dont think it is the case; i have saved about 100 times and the file size remaind ~7 megs, then when you try to load a file something happens and the file size jumps from 7 to 16, then it sticks around 16megs for a bit, then goes to 48 then to 180 - at which point you cant save anymore as you get out of memory error (at least on my system w/ 2Gb ram | 4gb swap)