Pound veal cutlets a few times with a meat mallet to tenderize, if desired. Beat egg with milk in a shallow bowl. Stir bread crumbs, parsley, garlic powder, salt, and black pepper in a separate bowl until well combined.
Heat 2 tablespoons vegetable oil, or enough to cover the bottom of a skillet, over medium heat. Dip each cutlet in egg mixture and then in crumb mixture to coat. Fry the cutlets in the hot oil until browned, about 3 minutes on each side. Drain cutlets on paper towels.
Heat 2 more tablespoons vegetable oil in the same skillet; cook and stir red bell peppers and onion in the hot oil until soft, about 8 minutes. Pour stewed tomatoes into vegetables and stir in water and sugar, dissolving sugar into the sauce. Bring to a boil, cover, and simmer for 30 minutes.
Reduce heat to low. Place veal cutlets into the sauce, cover, and simmer until veal is very tender, about 30 more minutes.
