Romania's Prime Minister was charged with forging documents and serving as an accessory to tax evasion and money laundering, further tarnishing the image of the former communist country as it struggles to shake off a reputation for corruption.
Prosecutors said they had named the 42-year-old Victor Ponta as a defendant on Monday in a five-week long criminal investigation, and temporarily seized control of his assets.
He denies wrongdoing, and says the case is politically motivated.
Financial markets shrugged off the development, which for now stops short of a formal indictment that would send the case to trial.
But it represents a new setback for Romania's efforts to clean up politics, business and the judiciary under pressure from the EU, which it joined in 2007.
Its reputation for corruption has deterred foreign investment, and even its anti-graft efforts have had the unintended effect of slowing decision-making and delaying important contracts.
Ponta said on Sunday he was stepping down as leader of his leftist PSD party until the investigation was completed, but has made clear he will not resign as prime minister despite calls from President Klaus Iohannis for him to quit.
The investigation began on June 5 and focuses on Ponta's activities as a lawyer from 2007-2009.
"Prosecutors ordered a stepping-up of the penal action against the defendant Ponta, a lawyer at the time of the deeds ... on charges of forgery of documents - 17 counts - accessory to tax evasion... and money laundering," the DNA anti-corruption prosecutors said in a statement.
'Under no circumstances will the prime minister resign'
Romanian television showed Ponta, who returned to Bucharest last week after nearly a month in Turkey for knee surgery, leaving the DNA headquarters on crutches.
He told reporters that the prosecutors had accepted expert accountants' evidence in his defence. "We will meet again when this is finalised in August," he said.
The Romanian leu did not react to Monday's news, trading slightly firmer against the euro as news of a third bailout deal for Greece revived risk appetite in Central European markets.
"The domestic political factor is just secondary as long as there's an unclear outcome regarding the prime minister," said Ciprian Dascalu, chief economist at ING Bank in Bucharest.
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Ponta has so far withstood intense political pressure from the opposition and from Iohannis, a centrist rival who defeated him in last November's presidential election.
Protected by a comfortable majority in parliament, he has survived three opposition censure motions, most recently last month.
"Under no circumstances will the prime minister resign," said Gabriela Vranceanu-Firea, a vice-president in Ponta's party.
"The legitimacy of this party was proven last time when the censure motion filed by the opposition was easily defeated in parliament."
Parliament also voted last month to block a separate investigation into Ponta over conflict of interest, awarding him immunity because he was in office at the time of the alleged offence.
He has no immunity over the charges brought on Monday, because they relate to a period before he became prime minister in 2012.
Romania has the fastest-growing economy in the region, with gross domestic product rising 4.3 percent year-on-year in the first quarter of 2015.