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From limited observation, I believe that a country will leave the alliance if it is at max panic (5/5) at the time of the monthly report to the council.

Are there any other reasons why a country might leave outside of the monthly report, or if their panic level is not maxed?

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I've seen mention that ignoring (or failing?) a terror attack in a country will cause it to leave immediately - but haven't a source or 1st hand experience to back that up at the moment. –  DMA57361 Oct 19 '12 at 18:46
    
@DMA57361, reading such a report was what caused me to write this - I wasn't sure if that was true or not either. –  agent86 Oct 19 '12 at 19:40

2 Answers 2

Ignoring a terror report with a country will cause it to leave the council immediately, it happened to me.

I had a terror report in China, which had only 1/5 panic level at the time, and I wanted to prolong the wait as much as possible to allow a soldier of mine to heal and participate in the mission. The mission expired before the soldier was healed and China withdrew immediately.

(I then reloaded and did the mission without the soldier.)

Unlike the original, it never happened to me that a terror attack took place at the same time with another mission, so ignoring a terror event is something that you should never do, and you will never have a reason to do so.

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Failing a terror event is also an automatic cause to leave. This includes evacuating after saving any number of civilians, and if you do evacuate then the civilians you saved are not actually saved (not mentioned on debrief). There is no partial success, either kill all aliens or you lose. I am not sure if you lose if you save 0 civilians but kill all aliens as I have never been unlucky enough for that to happen.

I must disagree with the other answer and say that sometimes it is worthwhile to skip a terror mission, at least on ironman. One country leaving the alliance is not as bad as losing your best soliders, so, unless you are confident of at least a minor victory it's best to skip terror missions.

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