Ok, let's keep things passive.
Any, and I mean ANY army with an active, non-emergency civillian-to-soldier ratio of more than 25 : 1 will be asked to cut down. In a state-of-emergency - Half the country occupied, two or more neighbouring countries at war with each other (but not involving your country) or at war with two or more neighbouring military pacts (Not individual countries) - then up to 30% of the population may be drawn in to a emergency war force. [b] Be aware that the emergency warforce will eat into your funds, and will consequently impoverish the surviving population[/b]

It's a tad confusing, so imagine this.

Country X has a population of 10,000,000. It borders countries A, B, C and D. It has 10 major cities with even population spread.
At a 25:1 Poulation:Soldier rate, they have a total of 400,000 Soldiers over a variety of groups. This does not include Militias, Private armies, Mercaneries etc. (Which, if you have reasonable justification and there are no probkems with everything adding up right, are immune to population limits)
If X is attacked by A, it must fight with those 400,000 men. If attacked by A and B seperately, it may declare SoE and pull out a 3,000,000 [i]defensive force[/i]. If A and B united as a group, it may not. If C attacks as well, independently to the A-B alliance, it can declare SoE, regardless of D's relationship with it's neighbours.
If A goes to war with B, then SoE may be declared in X. If A goes to war with Y, a country overseas, X may not declare SoE.
If X loses 5 of its cities, then the population is halved. Out of the remaining 5,000,000, SoE will be declared and the Emergency Army will countain 1,500,000 troops.

Emergency armies CAN liberate occupied territory, but CANNOT leave their own country. Also, for every member of the EA, the workforce is reduced, which reduces economy and production.