Taiwanese President Chen Shui-bian on Sunday apologized for causing political turmoil that hurt "the nation's image," but denied prosecutors' allegations that he was involved in embezzling money from a special fund for diplomacy.

The president and his family have been dogged by graft allegations for months; on Friday, prosecutors indicted first lady Wu Shu-chen on embezzlement, forgery and perjury charges. She was accused of taking $450,000 from a special diplomacy fund in 2002-06.

Prosecutors said Chen could be implicated in the case, but he cannot be indicted as a sitting president.

Click here to go to FOXNews.com's Asia Center.

"I decided to face the prosecutors' questioning and investigation because I had nothing to hide," Chen said in a televised address.

"I apologize to all our people and the ruling party members for hurting the nation's image and causing political turmoil," he said.

Ahead of the address, some 4,000 protesters gathered to demand Chen's resignation, and the deafening sound of blaring air horns rose from the crowd marching through downtown Taipai toward the wide boulevard in front of the Presidential Office. Protesters carried signs saying "End Corruption" and "Down with Abian," referring to president by his nickname.

"The prosecutor's report was crystal clear," said Tsai Wen-chih, a computer engineer. "Without concrete evidence, would any prosecutor dare to accuse the president of corruption?"

"Chen had better admit his errors," said Peter Huang, a businessman. "The longer he tries to hang on, the more catastrophic his outcome will be."

In his address, Chen complained that the regulations for the special diplomatic fund were "confusing and difficult to follow." He then launched into a long, technical explanation about how the fund works, and he argued that the rules for using it needed to be more flexible.

Early Sunday, Premier Su Tseng-chang, the island's No. 3 ranking leader, held an emergency meeting with his Cabinet to discuss the corruption scandal's possible repercussions on financial markets and social order, said government spokesman Cheng Wen-tsang.

"Taiwan is a mature democratic society, and we are not worried about keeping ... order," Cheng said.

Opposition lawmakers said they would try for the third time Monday to pass a motion calling for recall referendum against Chen. They failed to muster the required two-thirds majority in past attempts, but are now hoping enough ruling party lawmakers will defect to their cause.

Click here to go to FOXNews.com's Asia Center.