Okay, lets go back about a week and a half. After an incredible amount of prevarication, arguing, delay, and arm twisting, the Euro Zone leaders had FINALLY hammered out some kind of agreement for a partial default and increase in bailout funds for Greece. Close observers argued it was not quite enough and that there'd be more crises in perhaps a year's time, but overall the response was positive. It was a more solid plan than anyone had managed to put together in some time and markets were very happy with the news.
Then Papandreou came out of nowhere with a massive bombshell: The choice of accepting the bailout money would be put to the Greek people in a national referendum. Additionally, the referendum carries the inherent implication that a rejection of the bailout money is also a rejection of the Euro common currency (i.e. a Greek return to the Drachma) as well as Euro-zone membership.
If the bailout is rejected, it is expected Greece will immediately fall into a hard, disorderly bankruptcy possibly taking down all of Europe with it and dragging the world back to recession. Even if a total collapse is averted, Merkel and Sarko will both probably lose their re-election bids.
As bad as all that is, Greece has spent two years now being berated, abused, insulted, scorned and generally shit on by Europe. Any help was grudging, mostly out of sheer self-preservation. Better-off players like France or Germany frequently spoke sneeringly about humiliating Greece in the most ridiculous possible ways as some form of punishment.
The thing is, as much the Greeks are to blame for their own troubles (they basically perpetuated a gigantic and incredibly flimsy fraud to join the Euro zone and abused the hell out of it while times were good), I don't think anyone deserves the treatment they've had. It's as if a wealthy man became homeless due to his own profligacy. His former gambling partners now throw a few dollars in his hat as they pass him on the street, but never without spitting on him or cursing his name.
Ultimately, Papandreou is the leader of the Greek people. Not Europe, not the world, but Greece. He is giving his country its one last chance to stand up and decide its own fate. If they decide that the next time they see one of their old partners that they're gong to deliver a roundhouse to the face, then no one will ever toss coins in their hat again and they will truly be destitute. But it will have been their decision and theirs alone.
He is putting the responsibility to accept the bailout money - and far more importantly the extreme austerity conditions that come with the money - directly on the Greek people. If they do choose to accept the money, they must accept the conditions - no longer will the bailout be something imposed on the Greek people by angry foreigners. If the Greeks do approve the bailout and choose to stay in the Euro zone, that acceptance of responsibility will greatly improve chances for eventual success. It's genius, really.