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Very little is known about the history of Hydra until the beginning of the Ottoman rule. The first settlers of the island were Mycenaeans and are traced back to ancient times as witnessed by the excavations. No major historical event is known, until the 15th century period (after the fall of Constantinople), when the inhabitants of the island started to move inland and in the mountains to escape from the numerous pirate raids and the attacks of the Turks. Around 1460, Hydra welcomed refugees from Albania, Epirus, Crete, Evia, Kythnos and Asia Minor, as well as refugees from the Peloponnese who were escaping the Russo-Turkish War during the 18th century.
During the Ottoman domination, the Turks had little interest on the island because of its lack of water. The island began to acquire a powerful merchant fleet during the 17th century but the plague of 1792 wiped out a great number of the population and those who survived moved away. Things improved for Hydra in the 18th century, when it became powerful and prosperous because of its highly developed commercial fleet, trading with all of Greece and even abroad, with France, Spain, and America.
The superiority of the island's fleet reached its peak during the Napoleonic wars and with the creation of the Merchant Marine Academy, was able to monopolize the sea transport throughout the Mediterranean. The inhabitants of Hydra were beginning to fear attacks from the Ottoman fleet so they used their wealth to fortify the harbor with bastions of cannons, and their fleet power during the Greek Revolution against the Turkish yoke. They participated in the Revolutionary secret alliance called "Philiki Etairia" (founded in 1814) and many wealthy sea-captains used their vessels as warships and helped the Revolution economically.
The heroism of their crews became famous all around Europe and is still honored today. Two of the most heroic figures of Hydra were the ship owners Andreas Miaoulis and Lazaros Koundouriotis, who contributed to the revolution. The superiority of the island's ships and the heroism of its inhabitants was one of the most determining factors in the success of the revolution.
After World War II, the economy of Hydra went through a difficult phase. It recovered slightly with fishing and sponge fishing but declined again due to the restrictions of financial assistance to the sponge fishing enterprises from the Greek Agricultural bank. In the 1950s, Hydra became a center of artistic creation for many artists who used its magical scenery as the main theme of inspiration. Many famous movies were also shot on the island, including the Boy on a dolphin (1957) starring Sophia Loren and Phaedra (1962) starring Anthony Perkins and Melina Merkouri. Till today, Hydra attracts many artists and various festivals take place in summer in the Melina Merkouri Auditorium.