Place veal cutlets between two sheets of heavy plastic on a solid level surface. Pound a few times with the smooth side of a meat mallet to tenderize, if desired. Beat egg and milk together in a shallow bowl. Combine bread crumbs, parsley, garlic powder, salt, and black pepper in a separate bowl.

Heat about 2 tablespoons vegetable oil, or enough to cover the bottom of a skillet, over medium heat. Dip each cutlet in egg mixture, then press into crumb mixture to coat. Fry cutlets until browned, about 3 minutes per side. Drain on paper towels.

Heat remaining 2 tablespoons vegetable oil in the same skillet. Add peppers and onion; cook until soft, about 8 minutes. Add stewed tomatoes, water, and sugar; bring to a boil, stirring occasionally. Cover skillet; simmer for 30 minutes.

Reduce heat to low; place veal cutlets into sauce. Cover skillet; simmer until veal is very tender, about 30 minutes.