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Kalymnos is one of the largest islands of the Dodecanese, a rather dense island complex situated at the southeast corner of Europe. The development potential of the area is large. A serious restrictive factor, though, is fresh water availability. The latter has declined in the last few years, due to increase in population and in per capita water demand. As a result, the already stressed groundwater resources have been overexploited, and salinization of many coastal aquifers has already taken place. Since water import from other areas is not a sustainable solution, optimization of the management of local water resources is necessary.This paper deals with both sides of the water balance of Kalymnos. First an estimate of the evolution of water demand is discussed. The use of a GIS tool, in order to estimate renewable water resources at the hydrologic basin scale, is presented next. Conjunctive use of surface and ground water resources, including traditional rainwater collection, is proposed. Water resources development in the hydrologic basin of Vathy, which is one of the largest of the island, is discussed in more detail.