Joseph Muscat announced on Sunday that he will continue serving as Prime Minister until a new Labour Party leader is selected in an electoral process in January.
"This is what the country needs at the moment," he told a televised address to the country at the end of another turbulent day in Maltese politics.
Amid unprecedented pressure to step down immediately, Dr Muscat pledged he will first resign as a leader of the Labour Party on January 12 and in "the days after" will resign as a Prime Minister.
"In the meantime, I will continue to carry out my responsibilities as Prime Minister and Leader of the Labour Party. I am ensuring stability in the leadership of the country."
The message came just hours after several thousand protestors gathered in Valletta calling for his immediate resignation to ensure justice for the murder of Daphne Caruana Galizia.
The Prime Minister did not make any references to mounting calls to leave at once.
I apologise personally, even when these shortcomings were because of someone else
"I always said a Prime Minister should not serve for more than two legislatures. We are starting the process for a new prime minister who will continue carrying out the work for this legislature."
He said he had informed the President about his decision.
"As from tomorrow, we have to look forward. I understand that for this to happen there is a need for a clear signal of a fresh page, and this signal can be given only by me, as I need to shoulder everyone’s responsibilities, even where I am not involved.
"I am not perfect. And I have my own shortcomings... I assure you I gave everything in return for the trust you gave me... I had my defects and for them I apologise personally, even when these shortcomings were because of someone else."
Opposition 'no longer recognises PM's legitimacy'
In an instant reaction, Nationalist Party leader Adrian Delia said every day Dr Muscat remained in power was another blow to justice.
In a televised address, Dr Delia said the Opposition no longer recognised Dr Muscat's legitimacy and would boycott all activities that included him as Prime Minister.
"Joseph Muscat showed tonight he has failed to understand the people's anger or the meaning of political responsibility," Dr Delia said.
"He fails to understand that the murder of Daphne Caruana Galizia took place because of the collapse of the country's institutions; that this tragedy occurred because those closest to him - and for whom he is politically responsible - felt they were above the law; that he should never have involved himself in investigations over people he spent years protecting.
"Joseph Muscat today did not mention his [former] chief of staff Keith Schembri or minister Konrad Mizzi. Rather, he boasted of the power station that is at the heart of what led to the murder of Daphne Caruana Galizia."
Caruana Galizia case
In his address, Dr Muscat said he had promised justice in the case of Daphne Caruana Galizia's murder.
"I kept my word - we have three people charged with her murder and we also have the alleged mastermind charged."
He explained the process behind the request for the presidential pardon for both middleman Melvin Theuma as well as Yorgen Fenech.
"The decisions I took were in the interest of the common good... Nobody is above the law. I always took decisions I felt were in the national interest," he said.
"A journalist was killed in the most cruel way. The events of the last few days were extraordinary. The anger is justified and there can never be justification for this crime. Violence and disorder with the excuse of a protest are not acceptable."
He said he wanted this difficult chapter to be closed, but never forgotten.
He highlighted his government's successes in these last seven years, citing especially the growth in the economy, the cuts in unemployment and the reduction in energy tariffs.
Labour MPs offer unanimous support
Labour MPs were called for a meeting at the prime minister’s summer residence in Girgenti on Sunday morning to discuss Dr Muscat’s expected departure as prime minister.
In a statement issued after the meeting, the PL parliamentary group said it expressed its unanimous support for the Prime Minister in all decisions he would be taking and reaffirmed its confidence in him.
The pressure mounted when Yorgen Fenech was arrested in connection with Caruana Galizia's murder. Mr Fenech had close links with outgoing chief of staff Keith Schembri through secretive companies in Panama and Dubai.
The Prime Minister has repeatedly defended Mr Schembri as well as former minister Konrad Mizzi who was also linked to Mr Fenech through the secret company 17 Black.
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