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A protestor holds up a wooden sign during a demonstration calling on Maltese Prime Minister Joseph Muscat to resign after two members of his government were named in the Panama Papers leak scandal, outside the office of the Prime Minister in Valletta, Malta, April 10, 2016. REUTERS/Darrin Zammit Lupi

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By Chris Scicluna

VALLETTA (Reuters) - Several thousand people filled a big square in Malta's capital on Sunday and demanded the resignation of Prime Minister Joseph Muscat after the leaked Panama Papers said two of his political allies had offshore accounts.

"Shame on you, you are shaming Malta, you have lost the moral authority to govern," opposition leader Simon Busuttil said to the applause of protesters.

The rally, organised by the opposition outside the prime minister's office, drew no official comment from Muscat. He said on Wednesday that he would take a decision on the future of his two allies when he knows all the facts and on the basis of public sentiment.

The Nationalist Party opposition wants the removal of Health and Energy Minister Konrad Mizzi and the prime minister's Chief of Staff, Keith Schembri.

The Panama Papers showed how Mizzi set up a company in Panama and a trust in New Zealand.

Mizzi denies wrongdoing and says the arrangements were made to facilitate the management of his family assets, including income from a property in London. He has refused calls to resign and said he is subjecting himself to an independent audit.

However, on Thursday he told the ruling Labour Party he is ready for any decision that the prime minister might take.

Busuttil said the opposition is also calling for the resignation of Schembri, for having similarly set up a company in Panama and a trust in Panama. Schembri has denied any wrongdoing. He says that he was in business well before he assumed his government role and that he handed over his business management as soon as the government was elected in 2013.

The opposition has repeatedly hit out at Mizzi, who handled the government's biggest contracts, including the part-privatisation of the health service, the part-privatisation of energy provider Enemalta and an oil hedging agreement with Azerbaijan.

Busuttil said that although the scandal became known in Malta as early as February, Muscat had done nothing about it. Rather, he had promoted Mizzi to deputy leader of the Labour Party.

"His inaction is undermining Malta's reputation and endangering its financial services centre," he warned.

"How can the prime minister defend Malta's financial services industry in the EU when his fellow minister has a secret company in Panama?" Busuttil asked.

The opposition has presented a parliamentary motion of no confidence in the government.

The Panama Papers scandal broke a week ago when the German newspaper Sueddeutsche Zeitung said it had received 11.5 million leaked documents from Panama-based law firm Mossack Fonseca showing how offshore companies are used to stash the wealth of the world's elite.

The leak quickly led to the resignation of Iceland's prime minister and embroiled British Prime Minister David Cameron in difficulties over offshore investments made by his father.

(Reporting by Christopher Scicluna; Editing by Stephen Powell)

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