Malta PM Joseph Muscat 'plans to resign' over murdered journalist Daphne Caruana Galizia

Malta's Prime Minister Joseph Muscat has told associates he plans to resign amid a political and legal crisis over the 2017 assassination of journalist Daphne Caruana Galizia, the Times of Malta reported on Friday.

Official sources said Muscat was expected to make a statement announcing his resignation later on Saturday or on Sunday.

The reporter's family demanded Muscat step down after his cabinet turned down a request to pardon a businessman over the murder in return for testimony that lawyers said would implicate senior government figures, including chief of staff Keith Schembri.

Schembri, who was arrested earlier this week, was set free overnight.

Galizia's family said in a statement that they "share the anger and shock" of Maltese people following the release of "close friend of the PM and his former chief of staff" Schembri.

"We ask the Prime minister to leave his seat to a deputy who is free of conflict of interest", the family's statement read. "At least two witnesses and multiple clues implicate Schembri in the murder of our wife and mother", the family said, condemning Muscat who they said "continues to act as a judge, the jury and the executor in an investigation implicating three of his closest colleagues".

Thousands marched on Friday in Malta to demand Muscat's resignation. Protesters blocked roads, holding placards reading "assassins", "blood is on your hands" and "Muscat kriminal" (Muscat is a criminal), AFP reported. It followed demonstrations outside Malta's parliament.

The Friday protest was the sixth in two weeks, since the spectacular arrest of prominent Maltese businessman Yorgen Fenech, a suspect in the murder, as he was fleeing Malta on his yacht.

Fenech was charged in a Valletta court on Saturday with complicity to murder in the car bomb killing Galizia.

Fenech pleaded not guilty to this charge and to other charges related to the case.

Rapid developments in assassination probe

After two years of stalled investigations, the authorities have moved rapidly in recent days in the case of Caruana Galizia, who was blown up with a car bomb while working on reports about official corruption.

On Tuesday, tourism minister Konrad Mizzi quit while economy minister Chris Cardona suspended himself until the investigation is complete.

In a statement, Cardona said he had "absolutely no connection" with the case but after being asked for "further clarifications" from the Maltese police, he was "duty-bound to take the decision."

Mizzi said that he was resigning "in light of the political situation in the country", and said that he had "no connection and nothing to answer about in relation to the case".

Schembri has not spoken publicly on his resignation and arrest.

Also on Tuesday, a taxi driver who was suspected of being a middleman in Caruana Galizia's death, Melvin Theuma, received a presidential pardon, indicating that he may have provided evidence that could lead to a conviction of the person who ordered the killing.

Theuma was arrested in November as part of a separate investigation into money laundering in Malta, but offered to provide information on the murder, Reuters reported.

Businessman accuses PM's chief of staff

On Friday, prominent Maltese businessman Yorgen Fenech went to court and accused Schembri of being implicated in the plot. His lawyers want the chief investigator in the case removed, saying the investigator leaked information to Schembri.

Fenech was charged with complicity to murder on Saturday.