Papandreou can only dare to follow such a risky course because no political movement articulates an alternative. The trade unions, the Stalinists and the various pseudo-left organizations active in Greece either support the PASOK government as a lesser evil or promote brazen nationalism. Generally they do both at the same time.
As I was reading along in that article, I was thinking to myself about the alternatives to right-wing dictatorships, such as Iceland and Argentina, both of which said no to austerity and are doing all the better having done it.
There is no way Greece has to either swallow austerity or go fascist. All they need to do is look to Iceland and Argentina and even go those two nations better.
The drachma can be reintroduced as a type of United States Note (search this cite for info on how that would work -- I've written plenty on it), where the currency is not a debt currency or a tax currency but is issued directly into the economy by the government and at exactly the correct amount to avoid inflation and deflation. The people can democratically decide what to fund and not to fund without creating any booms that will bust.
Anyway, Papandreou is calling for a referendum on the austerity measures sought by the bankster class, the bond tyrants, who don't want to entirely eat their bad bets. Papandreou has sacked much of the top brass too, as a signal that he wants the people to be afraid of military dictatorship. They have the option I've stated above though, but you won't hear Papandreou echoing it. It doesn't fit in his scheme for power.