For the meatballs, lightly beat the egg in a large bowl. Add the meat, then add the bread, mashing it with your fingers, the onion, garlic, parsley, and salt and pepper to taste. Work with your hands into a soft, well-mixed paste. Shape into balls the size of large walnuts and roll in plenty of flour.
Heat about 1/2 inch of oil in a wide skillet until it sizzles when you throw in a small piece of bread. Add the meatballs, in batches, and fry briefly, turning to brown them all over, then lift them out with a perforated skimmer and drain them on paper towels. They do not need to be cooked through, as they will cook further in the sauce.
For the sauce, pour the stock (or water and bouillon cube) and wine into a wide skillet and bring to a boil. Add the saffron, lemon zest, salt and pepper to taste, and the sugar.
Make a picada: Fry the bread, almonds, and garlic cloves in the oil in a small skillet until golden brown. Lift them out and let cool a little, then grind to a paste in a mortar or food processor. Stir the picada into the sauce.
Add the meatballs and simmer, covered, over very low heat, turning once, for about 20 minutes, until cooked through, adding a little water if necessary.
Recipe courtesy of The Food of Spain by Claudia Roden.