John Key and Bill English will have to decide over the next two days whether South Canterbury Finance really is Too Big To Fail.

The Government has already guaranteed the $1.7 billion invested in South Canterbury Finance by more than 20,000 investors until the end of next year. So many would say it has already decided South Canterbury Finance cannot fail.

But now it must make an urgent call on whether to put South Canterbury into receivership, or to contribute yet more taxpayers' money in the hope it can survive and then thrive past the end of the government guarantee.

The choice is a difficult one. The immediate pain from a receivership would be substantial. It would trigger the $1.7 billion payout to investors under the government guarantee. Some believe that shock to the Government's finances would be enough to trigger a review of New Zealand's sovereign credit rating by Standard and Poor's and/or Moody's.

I don't believe it would be enough to justify a rating review, but if it did that would immediately increase wholesale interest rates, which would eventually flow through to the entire economy.

There is also the fallout on the South Island economy. Any receiver would force through sales of farms, property developments and small businesses, many of which are not paying the interest on the loans received from South Canterbury Finance.

Dairy farm prices could potentially take a big hit. There is a view this could send a new chill through the South Island that eventually costs jobs and stunts any economic recovery. That's because the Australian-owned banks are unlikely to step in to take over the loans.

Yet this pain of receivership may be less than the eventual agony of a slow-moving collapse.

South Canterbury Finance does not have a future beyond the end of the deposit guarantee. For it to survive, it would need to substantially increase its credit rating, find a new funder and convince already sceptical investors to go naked in backing the company without a deposit guarantee. At some point, the dairy farming sector, particularly down south, will have to reduce its debt. When that happens, it will be painful.

But as many investors in finance companies such as Strategic, St Laurence, Hanover and Dominion would attest, giving them more time to "work it out" is often worse than pulling the plug immediately. The Government faces a bail-out decision in the same way Hanover Finance investors did eight months ago and 12 months before that. Those investors chose badly. Let's hope the Government does not.