Although Renault have joint ventures and plenty of operations around the globe they are part owned by the French government and that government are keen to hold on to their auto sector. Their sector is different to what the German marques chase on the international stage, however, French cars are very popular in France. Whatever government is in Paris they are obligated to defend the French auto sector, they would be very unpopular if they did not.
Meanwhile, what does FIAT make in Italy these days?
FIAT get cars made in the former Eastern Europe, slap an Italian flag on and pass off the product as having Italian design. That is what motorists buy into, the Italian style and not the Italian workmanship. They don't care if the tin box is made in Timbuktu, so long as it expresses their personality in some way then they will buy it.
Italy has gone the way of the British auto sector, they have lost the ability to have Italian companies making mass market cars in actual Italy. Sure there are few thousand Ferraris and other lifestyle accessories churned out but those FIAT 500 cars for the ladies are not made in Italy. Those days are over.
Aside from the poor communication between Renault and Nissan, the proposed deal strikes me as over pushed by the FCA management. It went down with the French establishment as well as the post-Brexit British idea of outsourcing the NHS to American private healthcare providers. A complete non-starter because the management was not a cultural fit. Having Renault thrown in with some brash American led FCA was not on the table. The publicity for the merger was over-eager, as if that would make it happen by making it appear the deal was as good as done.
It is important to understand how the 'captains of industry' work. They are capitalists, not Marxist social workers. They don't care about making jobs or even delivering a product for the regular working/middle class person. They are not cast from the same stuff as Henry Ford. They get their bonuses for merger and acquisition activity and move on to the next deal.