Does demoralizing an army help lower defences.

It lowers their effectiveness by 5% of current readiness to a minimum of 70% after 7 successful (95, 90, 86, 82, 78, 74, 70), assuming they started at 100%.

Anything below 70% is treated as 70%

It not only lowers defense, but offense as well. The military's overall effectiveness is reduced if you reduce their Readiness. Of course, it regenerates over the course of turns, so it's best to make your attacks at the start of your play for the day, so that your Readiness will go back to 100% by the time you're done.

don't gravedig.