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What does Morale do for Units and Cities and how can it be influenced?
This question / problem has been solved by Standupimage
For units if morale sinks too low then they will leave. Combining Evil Units with Good ones can cause this as well as recruiting units that have an opposite alignment to your Wizard. Not being able to pay units will also decrease morale.

Poor and Terrible morale means minuses to defence and resistance.

Party morale of unrest means a 10% chance of a unit leaving. Unruly 50%. Unit with lowest morale deserts.

The Bard skill can be used to negate this.

Unhappy cities have a chance to rebel. This can be countered by terrain, temples and shrine of order.
Thanks for the info Standup. ^_^
Very happy cities also have the chance to finish a building/unit in one turn.