An investigating judge recommended that Princess Cristina of Spain, sister of King Felipe VI, be charged in a tax fraud and money laundering case that has helped inflame opposition to the monarchy.
Infanta Cristina, 49, was questioned in court in February about the business dealings of her husband, Inaki Urdangarin, and could now face trial.
However, an appeal has been lodged against the decision.
The judge’s ruling will come as an embarrassment to Felipe VI, who came to the throne only six days ago.
The tax fraud case was one of several scandals that weakened the popularity of the Spanish monarchy and prompted the abdication of King Juan Carlos.
Princess Cristina’s appearance in court in Mallorca was unprecedented for the royal family and if she goes to trial, she could face up to 11 years in jail.
The investigating judge’s decision is a major development in this investigation and a huge embarrassment for the Spanish royal family.
Judge Jose Castro believes Infanta Cristina knew more than she has let on regarding the allegedly corrupt activities of her husband, Inaki Urdangarin.
This inquiry has now lasted more than three years and during that time it has heavily eroded the popularity of the royal family. Princess Cristina has already appeared in court to testify, but the door is now open for her to face trial, which would take the scandal to a new level.
Judge Jose Castro has been investigating allegations that the princess’s husband embezzled millions in public funds with a former business partner.
Inaki Urdangarin, who is the Duke of Palma, and Diego Torres were alleged to have received 5.6 million euros ($7.5 million) by overcharging regional governments for organizing sporting events as part of a not-for-profit organization called Noos.
Announcing his decision, Judge Jose Castro said the princess should be tried alongside her husband and other suspects.
Anti-corruption prosecutors had already opposed his decision to name Princess Cristina as a suspect, saying there was insufficient evidence against her. Prosecutor Pedro Horrach said on Wednesday an appeal was being lodged “because there is still no piece [of evidence] against” the princess.
A final decision on whether Princess Cristina should stand trial will be made by the provincial court at Palma de Mallorca.