Arguably it's the only workable answer. Cede the lost territory, consolidate your population in the new area without the outsider elements, and start a new system on a non-debt based economy that refuses to trade for outsider currency, only goods and services and prevents non-vetted outside influences from entry. Far easier than trying to garner legitimacy for a widespread civil war or widespread anti-establishment actions and/or population based problem solving. Surrounding territory will inevitably crumble under the mismanagement of its remaining population, allowing an easy reclamation process sooner or later so long as the descendants of the new territory don't fall for the same trickery as they have multiple times through history.