The economy is tanking. The government is on the brink. The treasury is fending off market vigilantes and credit downgrades. The capital is seething with protest by day, desolate and derelict by night.

But as far as tourism is concerned Greece is not merely open for business, it is expecting a bumper year. And for visitors this summer, the country promises to be one giant bargain.

Hydra is a case in point. The hydrofoils and ferries across the Saronic Gulf to the island are packed.

“Hydra is as popular as it has ever been,” says mayor Angelos Kotronis, seated before an array of oil paintings conjuring the glory of the island’s seafaring past. “Our hotels are full, our shops are full, the boats are full. We’re not complaining.”

Tourists who might have headed to north Africa have instead opted for the Greek islands. With arrivals set to rise by at least 10%, the sector has become the sole bright light on a landscape darkened by an otherwise epic battle with the country’s debts.

“It feels good to be here supporting locals economically,” says Faye Delano, an American visitor, standing on Hydra’s famous horseshoe-shaped harbour. “They need the money.”

Despite encountering strikes and demonstrations, holidaymakers appear to be happy to be helping Greece – even if it means dodging teargas in Athens en route to the islands.

Last week, as protests intensified in the heart of the capital, tourists could be seen nonchalantly winding their way through Syntagma Square, site of the Greek parliament and the capital’s poshest hotels, as riot police clashed with protesters venting over the prospect of yet more austerity. “It all adds to the colour,” said Fabricio Vianello from Milan. “When you’re on holiday such things don’t bother you as much.”

Officials are hoping the increase in the number of visitors will go some way to helping the country out of its financial hole.

Tourism accounts for one in five jobs and almost 18% of GDP, and the socialist government has given the sector special emphasis in the hope that it will help kickstart the battered Greek economy.

The attention has meant that in some ways Greece has become cheaper.

Last month, the administration reduced the price of ferry tickets by abolishing costly levies. The move followed the waiving of landing and taking-off fees at airports outside Athens, which has resulted in a reduction in the cost of air travel. A similar decision to bring down VAT from 11% to 6.5 % on tourist accommodation has ensured the country has become more competitive.

Hotels beyond the capital have been deluged with bookings as tourists have scrambled to snap up double rooms going for as little as €13 on the island of Corfu and €36 on Mykonos.

For the first time ever, reservations have been made for as late as November, according to Expedia, the world’s largest online travel agency.

The lifting of visa restrictions for non-EU citizens from Turkey, China and India has also added to the influx. Russian visitors are expected to exceed 500,000 this year, an increase of 50% over 2010. “You see a lot of boarded-up shops and businesses, which in some ways has made Greece less competitive and kept prices high,” says Elizabeth Howard, a British tourist. “But it’s been made up for by the reduction in travel costs.”

One of Greece’s most desired destinations because of its association with movie stars such as Sophia Loren and Richard Burton, Hydra is in many ways a snapshot of the country at large. Thanks to a drop-off in construction, unemployment has suddenly surged, making the island ever more dependent on visitors.

“The municipality is faced with debts of over €3.5m – we can’t even pay our water bills,” says Kotronis, a local architect who assumed the post of mayor last November.

“Back in the 1990s Richard Branson tried to build a resort here but eventually he was forced to drop the project after coming up against bureaucratic obstacles and local opposition, all the things that have stopped development in Greece. A lot of people now agree that it was a huge misfortune for the island.”

Yet whether the Greeks can get tourists to part with their money is another question. The grand ochre-coloured mansion housing the island’s main museum high in the town attracts a steady stream of visitors but despite the steep climb, many refuse to pay its €4 entrance fee when they reach it. “Often if they can’t get the reduced tickets for pensioners and students they’ll stay outside,” says Anna-Maria Sarigiannis, who has worked at the museum for the past 16 years. “We’re definitely feeling the pinch of the economic crisis.”

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