By ANGELOS TSATSIS and STELIOS MISINAS

SANTORINI, Greece (Reuters) - Greece's tourism jewel, Santorini, welcomed its first cruise ship of the year on Sunday after thousands of small earthquakes in February created a state of emergency, forced thousands to flee and had locals fearing the season would be lost.

Millions of tourists flock to Santorini every year, squeezing along its whitewashed cobbled streets to view its famous cliff-top sunset. The increased seismic activity - unprecedented even in a country as quake-prone as Greece - had prompted authorities to shut schools, halt construction and dispatch rescuers to the island.

On Sunday morning, the Celestyal Discovery docked in the sparkling Aegean waters off Santorini with around 1,700 mostly American tourists on board. Celestyal Cruises had taken Santorini off its list earlier this month.

"It's exciting to know that the island's open again and we get to visit first," said 67-year-old Deborah Terry.

Another passenger, Julie Eberly, said she was confident the island was out of danger.

"We trust the tourism board here, so if they said it was safe to come, we came with open arms."

An island of around 20,000 residents, Santorini took its current shape following one of the largest volcanic eruptions in history around 1600 BC. It welcomes around 2.5 million tourists every year and its economy depends almost exclusively on tourism.

Locals said they were pinning their hopes on visitors returning to the island.

"We all hope that things will return to normal, that people will come back," said Tassos Kontos, a shop owner. "The cloud seems to be lifting."

No major damage has been reported on the island following the quakes, but authorities have said they will set up an evacuation port to facilitate the safe escape of people in case a bigger quake hits.

(Writing by Karolina Tagaris; Editing by Sharon Singleton)