Re: Fear?
Fear spells like Terror or Panic will lower the morale of the soldiers they effect... not the squad. However, it is my understanding that a squads' morale is basically an average of the morale of all the units in that squad.
Therefore, several units with reduced morale will drag down the rest of their squads' morale... think the first few units turning to run, and then the rest of the squad joining in.
Likewise, boosting the morale of several individuals in a squad (or just having several high-morale individuals)) will raise the morale of the squad as a whole.
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