The problem is that in order for the rescue to work, the people to be rescued follow the rules. Since the problem started with the Greeks scamming their way in and fingering their noses at the rules since there is no way on earth the rescue will work.
The people who have to buy these bonds in order to make the rescue see no point in throwing good money after bad. From an investors point of view all the money spent on Greece and Italy so far are sunk costs, they won't invest any more.
My understanding is that most US banks have already written off their Greek loans. The europeans have not. European banks still have the Greek bonds at 40-80% of face. If they had to write these bonds to market they would have to demand more capital to meet their reserve requirements.
The traders in Europe are trying to escape their exposure. If you have 1000 shares in Grossbank and Grossbank has lots of Greek debt then you will either have to pony up to recover your capital in Grossbank, or you sell Grossbank for what you can get out of it.
So far, Germany has been the source of most rescue funds. Germany can't afford it. They can't even afford rescue for the eastern Lander, why should they rescue Greece?
There is a lot of evidence that the average German voter is fed up with this. When it comes to a vote in the Bundestag it will make the government there fall. The opposition might be more inclined to vote for funds than the government, but they want to take over. Whoever wins the German elections coming up during this fiasco will campaign on no more bailouts. Or they will lose.