Mourning procession at the resort of Laganas, Europe's party capital on Zakynthos, led by father of Greek taxi driver who killed former England football mascot Robert Sebbage

Bloodstains still mark the place where Robert Sebbage was stabbed. On Friday night, a floral tribute to the former England football mascot was erected at the spot by a mourning procession led by the father of the Greek taxi driver who plunged the knife into the 19-year-old holidaymaker's heart.

For a while, Laganas, Europe's party capital, went quiet as the bars and clubs and open-front restaurants along its neon-lit strip turned off their sound systems.

"This is a double tragedy," lamented Dionysios Morfis, hours after his taxi driver son, Stelios, was imprisoned on charges of premeditated murder after confessing to stabbing Sebbage and four of his friends in an early morning brawl on Wednesday night.

"A boy has been killed and his family destroyed, but my own son will pay for it for the rest of his life. We are a broken family, too."

In 2007 Sebbage walked into Wembley stadium with David Beckham at his side; the then 14-year-old from the town of Tadley in Hampshire was a Reading FC fan who had battled a rare neuropathic bowel disorder requiring regular trips to hospital.

Police are still trying to establish what happened in this instance. But after his death, as the holiday season gets into full swing, Greece's premier island resort in the Ionian sea is seething with barely disguised hatred between British partygoers determined to have a good time and Greek locals disgusted with their behaviour.

"This place is a boiling cauldron," said Giorgos Kallivis, who spent several hours with sweat pouring down his cheeks in the baking heat vainly trying to remove the blood from the pavement in front of his pottery shop. "Whoever says otherwise is closing their eyes to the truth. I'm not excusing what happened, but it was going to happen. And it could happen again.

"Every night there's a fight, someone gets beaten up. Tour operators are to blame: all they are interested in is getting the kids drunk, and that's where they start to misbehave and all the trouble starts."

Greece is accustomed to young Britons who, like Sebbage, are often taking their first holiday abroad alone. But, after Malia in Crete and Faliraki in Rhodes, Laganas has scaled new heights in the realm of anything-goes behaviour.

This week, the debauchery was on full display as beer-swilling youngsters careened around the resort on oversized quad bikes in the morning and emerged from marathon pub crawls in intoxicated fury at night.

"Every morning I see them on the beach totally drunk when I'm laying out the loungers," said Philippos Gorgoras, a hotel employee. "Today there was a couple having sex over there, and 10 others standing around them wildly clapping. What struck me was that the couple didn't seem to mind."

The stabbing has shocked Greeks, but little pity has been shown Stelios Morfis. He had been a member of Athens' elite presidential guard before returning to the island to work for his father's cab firm. Born in Sydney to an Australian mother, the burly 21-year-old has run into trouble before. "Greeks are a hospitable people. What he did was absolutely deplorable," said Nikos Diamantopoulos, a taxi driver in Patras town on the Peloponnese. "He might be saying he lashed out in self defence with his father's fruit knife, but it's unacceptable. A lot of us are very afraid that this will reflect badly on taxi drivers in Greece."

More than anything, the attack has prompted soul-searching among a debt-stricken nation dependent on tourism.

Seated before an icon in his air-conditioned office, the police chief in Laganas, Dimitrios Angeloudis, was in no doubt where Greece had gone wrong. Tourism, he said, had become seriously toxic.

Though British police officers, including rape specialists from Devon and Cornwall, visited the resort earlier this year, Angeloudis believes that no amount of help will resolve a situation increasingly out of control.

"Not even an army could solve it. The root cause of the problem has to be dealt with first, starting with the pub crawls, but nobody wants to do that, because a lot of people would stand to suffer.

"The only way out is if Laganas improves its infrastructure and focuses on a better-quality tourism. But that will require time, and, again, loss of money."

Local officials admit that adulterated alcohol also plays a role. Bars in the resort are notorious for serving cocktails mixed with pure spirit, part of an age-old tradition of making servings go further.

"I've requested that there be quality control, that random tests be conducted on bottles in bars here, and it just hasn't happened," said Angeloudis. "These drinks encourage the very bad behaviour, which includes throwing bottles at taxis and police cars."

For Britons visiting Laganas, there has been shock at the death followed by anger and, among some, a desire for revenge, with holidaymakers threatening to stage protest rallies to "take back our blood".

"Taxi drivers are especially aggressive and it's put all of us on edge," said Alex Cambell, as he distributed flyers outside a club in the resort's main strip. "They get a lot of flak, but they're also well-known for beating tourists up."

Ben Phillips, a criminology student at Hull, put it another way: "I think this year will be my last party holiday. Next year I want to go travelling to see a bit of the world. I want to go to Peru."