Nama won't do it. Neither will nationalising the banks. But bankruptcy could get Ireland out of its financial crisis both quickly and cheaply.

According to new research published last week by the Bank of International Settlements (BIS), the Switzerland-based bank for central banks, a systemic banking crisis can be resolved up to one-and-a-half years earlier and at less cost when it is accompanied by a sovereign default – in other words, when the government stops paying back its bonds.

According to the BIS paper, the economic contraction in Ireland could last up to four years and wipe out more than a fifth of the country's output. The report also said Ireland might return to growth sooner than many other countries because it was among the first to enter a recession.

The BIS paper Financial Crises and Economic Activity, which analyses 40 different bank crises going back to 1980, found that where a country stopped servicing its debt, it got out of its banking crisis approximately six quarters faster than would have been expected. The reason: by hoarding precious financial resources instead of paying creditors, the governments the BIS studied were able to use the extra money to support their banking systems more quickly and decisively.

However, the strategy only works when the majority of a country's debt is held by creditors outside the country. In Ireland's case, 84% of government debt is held externally. There could be a catch, though. All of the examples in the BIS report have their own currencies and control their own central banks. While the report's authors controlled for simultaneous currency and sovereign debt crises in their research, there have been no instances of a eurozone country defaulting on its debt, strategically or otherwise.