It is morale, not moral. Different words and meanings.
Yet it is you who fail to read, or more accurately, fail to comprehend.
A federation is a joining of realms under a common banner. Think of it as an empire or a kingdom with joint crowns.
Let us use the United Kingdom for instance. Your realm is England. You are in a federation with Wales, Scotland, and Northern Ireland. At some point, France decides to invade Scotland and they either annex it or drive it all into a state of anarchy. How do you think the common citizens of the rest of the federation will feel if England just sat back and LET it happen?
I would say morale would suffer, and rightly so.
Your saying things he didn't. Morale isn't dropping because Kabrinskia got destroyed, it's dropping because they disliked Kabrinskia yet were in a federation, when the realm was destroyed they would be happy.