European countries should learn from Italy and establish penal codes "fit for the mafia" to get to grips with people-trafficking organisations responsible for enslaving nearly one million people on the continent, according to a report by the European parliament.

The report by the parliament's committee on organised crime, corruption and money-laundering, which will be put to the vote on Wednesday, paints a devastating picture of slavery across Europe, with about 880,000 people in forced labour in the 28 EU member states, 270,000 of whom are victims of sexual exploitation. Criminal gangs are estimated to earn €25bn (£21bn) a year through trafficking.

One of the authors, Slovenian MEP Tanja Fajon, said the figures showed "the mafia is no longer Italian, it's everywhere in Europe. We are dealing with an octopus-like European mafia that is feeding off the current crisis and has its tentacles wrapped around member states' assets."

The European parliament urges member states to establish witness protection programmes for insiders who collaborate with investigators and to reuse assets seized from criminals for social purposes – all flagship measures of Italy's fight against the mafia.

Anti-slavery campaigners welcomed the main proposals. Anthony Steen, a former Conservative MP who is chairman of the Human Trafficking Foundation, said: "Italy's approach to modern-day slavery is pretty advanced. They have learned that the best way to hurt criminal gangs is to take away their assets, and they are very good at helping the victims too."

A recent decision by a court in L'Aquila is considered a precedent for the rest of Europe: 17 victims of trafficking were each awarded €50,000 using assets confiscated from the perpetrators.

Laws allowing the seizure of assets including property, land or businesses are among a series of measures introduced in Italy during the 1980s and 90s to clamp down on the activities of the mafia.

Shaken by several high-profile assassinations, Italy first made active membership of the mafia a crime in and of itself – "mafia association" was introduced into the penal code in 1982 after the killing of the Palermo prefect Carlo Alberto Dalla Chiesa. Ten years later, the country passed a law to grant investigators new powers of extended confiscation of assets.

Other crucial features of the Italian legislative armoury include the use of pentiti – criminal insiders turned state witnesses who can expect leniency in return for information about their organisation and superiors – and telephone interception.

But observers say the weakening of the Sicilian mafia was to the detriment of investigations into the 'Ndrangheta and Camorra, which have emerged as deadly criminal organisations. Praise for Italy's anti-mafia strategy should be seen in that context, said Federico Varese, professor of criminology at the University of Oxford.

"Italy has been very effective and innovative in its use of judicial tools, but we cannot say the fight against the mafia has been won," he said. "There has been a tendency to think that innovation of the penal code would solve everything, but that's clearly not the case."

Only eight people were prosecuted for human trafficking in the UK in 2011, and the home secretary, Theresa May, announced in August that she would introduce a modern slavery bill to improve "shockingly low" prosecution rates in the UK. But the authors of the European parliament's report argue that greater European co-ordination is required to stand up to criminal gangs who are often more at ease with cross-cultural co-operation than national law-enforcers.

"If the member states are not brave enough to share police and judicial powers, then we will never manage to resolve this crisis but deepen it," said Fajon, a member of the Progressive Alliance of Socialists and Democrats.

May and her colleagues will be particularly dismayed by the European parliament's call to establish a European public prosecutor's office to help tackle modern-day slavery. The launch of a pan-European prosecution body was proposed by the so-called wise men's committee of EU experts in 1999, as a measure to counter the fraud of EU funds, and has been opposed by a series of British governments.

The proposal's re-emergence as part of the anti-slavery initiative is likely to clash with the British government's drive to repatriate powers from the EU. One British Brussels insider described the office's inclusion as "worrying mission creep" that could leave the UK marginalised in Europe.

Spain has previously supported the creation of a European public prosecutor to help counteract the short-selling of eurozone financial products – which in turn could hurt traders based in the City. Steen called the proposals "another layer of bureaucracy" that was irrelevant to the cause of tackling modern slavery.

Klara Skrivankova of the NGO Anti-Slavery International said greater co-operation could be achieved by better use of pan-European police forces such as Europol. "The tools are there, but we don't use them enough. Europol is still seen as a supplementary force – it should be more proactive. Modern slavery works across borders: if you solve the problem in one place, the gangs just move elsewhere."