Caruana Galizia, a campaigning journalist who investigated corruption, was blown up by a car bomb on October 16, 2017. Her family demanded that Muscat resign, after his right hand man Keith Schembri was set free overnight.
Malta's Prime Minister Joseph Muscat came under increasing pressure to resign on Friday as protesters cried foul over the latest twist in the case of slain investigative journalist Daphne Caruana Galizia.
The escalating murder investigation has rocked the tiny Mediterranean island and reached the highest rungs of the country's politics, with two ministers and Muscat's chief of staff Keith Schembri stepping down from their posts this week.
Thousands of demonstrators took to the streets of the capital Valletta after Muscat refused to give immunity to the main suspect in the 201 7 murder, tycoon Yorgen Fenech, to disclose what he knows about the case.
Fenech has identified Schembri as the mastermind behind Caruana Galizia's 2017 car bomb killing, according to sources.
Schembri was arrested on Tuesday, but his release on Thursday sparked accusations of a cover-up.
PM plans to resign?
Caruana Galizia's family accused the prime minister of protecting his long-time chief of staff, demanding he hand power over to a deputy who didn't have a conflict of interest.
"We share Malta's shock and anger at the release of Keith Schembri," the family said in a statement.
"At least two witnesses and multiple pieces of physical evidence implicate Schembri in the assassination of our wife and mother."
They accused Muscat of playing "judge, jury, and executioner in an assassination investigation that so far implicates three of his closest colleagues."
The Times of Malta said Muscat told associates on Friday that he plans to resign imminently, though AFP was not able to immediately confirm the report.
Muscat, who has vowed to resign if links were found between himself and the murder, said Friday he would remain in power, telling reporters he wanted "this case to be closed under my watch".
Muscat said Friday he had recused himself from the decision on whether to grant immunity to Fenech.
The prime minister later said he had reported Fenech to the police for attempted blackmail, saying the mogul had threatened to implicate him in the affair if he was not given a pardon.
Protesters in Valletta on Friday night chanted "Mafia" and "murderers".
"The killing of Daphne Caruana Galizia was a terrorist mafia act carried out by our state," said activist Manuel Delia .
He added that Schembri could have been kept in custody over corruption, money laundering and obstruction of justice.
Protester Marylou Gafa called Muscat's refusal to give Fenech immunity "disgraceful".
"He could have never decided in favour of a pardon that would have sent his closest collaborator to jail," she told AFP.
Fenech, a tycoon whose business interests span the energy and tourism sectors, was arrested on his yacht last week after an alleged middleman in the murder, taxi driver Melvin Theuma, was offered a pardon to identify those involved.
That arrest was followed swiftly by the resignation of Schembri and tourism minister Konrad Mizzi, while economy minister Chris Cardona said he was "suspending himself".
Caruana Galizia, a popular journalist and blogger described as a "one-woman WikiLeaks", exposed cronyism and sleaze within the country's political and business elite.
Before she was killed, she had alleged that Schembri and Mizzi had been involved in corruption. She had named Cardona in a separate case.
Leaked emails revealed in court appeared to show both Schembri and Mizzi stood to receive payments from a Dub ai company called 17 Black, owned by Fenech.
The Caruana Galizia family said Schembri and Fenech have the same doctor, who reportedly served as an intermediary, passing secret notes between them.
'Fear for my life'
A Maltese court on Friday heard a request by Fenech for the chief investigator in the case, Keith Arnaud, to be removed, amid allegations he also had close ties to Schembri and the prime minister. A decision was expected Monday.
"I fear for my life. I'm ready to go all the way for justice to prevail and the truth to come out," Fenech said to journalists after he was released on bail.
Fenech's lawyer told the court there was proof of ties between Schembri and Theuma, including a photo of the pair "hugging" in the prime minister's office. Schembri's release was "scary" and suggested Arnaud was not impartial, the lawyer said.
"This is happening in the EU, right now. Where is the voice of the European Commission or other EU leaders?" Robert Barrington, former head of Transparency International in the UK, said on Twitter.
The European Parliament is planning to send a mission to Malta, a parliament source told AFP.
Protester James Vella, a medical student, said this was not what he voted for.
"We were promised a clean way of doing politics and one based on meritocracy but instead we got a government that, decision after another, killed our democracy," he said.