Mr Roh is feeling the heat after a series of scandals

The Grand National Party (GNP) said it would boycott parliament and was considering launching an impeachment.

A BBC correspondent says the row about political funding has left President Roh fighting for his political life.

State prosecutors are looking into the row, and President Roh said his veto would let them report first.

But the GNP argued that state prosecutors cannot be impartial.

Prosecutors are investigating claims that an aide of President Roh received 1.1bn won ($956,000) shortly after last December's presidential elections from SK Group, the country's third-largest business conglomerate.

They have since widened their investigation to other giant conglomerates including LG and Samsung, South Korea's most successful company.

The opposition-controlled National Assembly had overwhelmingly passed a bill demanding the appointment of an independent prosecutor.

After the president vetoed it on Tuesday, arguing that state prosecutors must be allowed to conduct their own investigation first, the GNP described the veto as a "tyrannical act trampling on parliamentary democracy".

The BBC's Charles Scanlon in Seoul says opposition politicians are accused of accepting even larger payments than the governing party, but they allege the official investigation is biased against them.

They say only a special prosecutor can give even-handed treatment.

Crisis point

The row has been escalating since President Roh stunned the country in October by proposing a national referendum on whether he should remain in office.

President Roh, who came to office promising to clean up politics but who has seen his public approval ratings plummet, said he had lost the moral authority to govern as financial scandals and economic recession left him open to political and press attacks.

The GNP is likely to block a referendum.

It sees the move as a "political plot" aimed at shoring up support for Mr Roh ahead of parliamentary elections in April.

The President is currently without a power base in the National Assembly. He split from his own party, the MDP, last month, after it was wracked by mass defections to other parties.