In a parking bay on a deserted industrial estate in Lyon, Karen, in her late 40s, sat in the passenger seat of her second-hand Ford Transit van wearing only black underwear. It was 7.30pm on a Friday night. She lit a pink lantern on the dashboard. Soon, a steady flow of cars was circling the car park – Mercedes, jeeps, old bangers — their drivers slowing to peer at the women in corsets sitting alone in a dozen parked, white vans, arms folded, candlelight flickering across their faces. "Some men drive round for hours just staring," she said. "Then they'll stop, ask the price, and demand a discount. I'll say, 'What, for all that petrol you've wasted?'"

A silver car slowed. "20 euros for a blow job, 40 euros for 'love'," she smiled. "Too expensive," said the man, accelerating. A 60-year-old agreed to sex for 40 euros. Karen climbed into the back of the van, which she had decorated with a bed, a heater, purple curtains and a chest of drawers. Three minutes later the man walked out into the night. Karen laid out a clean sheet of paper-towel on the bed, spruced her blond hair. "See, it's all very quick," she said. Most of the evening was spent sitting waiting. Then in 15 minutes, three clients paid for sex, including a Spanish man in his 20s in designer clothes. Each took less than five minutes. She had made her daily quota of cash needed to pay her bills.

A former secretary from the southern naval city of Toulon, three times married, with two daughters, Karen first started selling sex in the 1980s: a brief stint on the street near a Lyon station, working mainly in clients' cars, "which is very uncomfortable". She quit and got married, but in 1992, divorced and with a young child she suddenly needed to "put food on the table". She returned to sex-work, first in a hostess bar, then meeting clients at her home via a newspaper small-ad. For seven years, she has worked on the street in her van, Monday to Saturday from 7pm to around 1am, paying tax as self-employed. "'No pimp, no boss' is my motto. I'd rather do this than an office job, getting shouted at by a boss for a pittance." Her strict rules include condoms for everything and no kissing clients. "You have to hit rock bottom to do this," she said. "It's not an easy job, but it's a job where you can make money quickly. People try to say we're victims, say that we're alienated, that there's a sex attack in our childhood history, but I've never been raped by anyone. This is my free choice." She never looks into a client's eyes in the moment of a sexual exchange – "I look anywhere but" – and they rarely tell her their names. But in her top drawer beside the condom supplies is a petition signed by several of them: in neat writing, stating their profession: such as "public works" or "driver". It's a protest against the new French government's war on prostitution.

Sex work was hardly a priority in the French election campaign, yet it has become one of the defining social issues of Francois Hollande's new Socialist government. In June, the women's minister, Najat Vallaud-Belkacem, made the bold announcement that she wanted to "abolish prostitution" in France and Europe. "My objective, like that of the Socialist party, is to see prostitution disappear," she said. The previous French parliament had already adopted a resolution aiming for a "society without prostitution". But can a government rid society of paid sex? The debate is raging among French intellectuals. Sex workers have taken to the streets, accusing the government of moralistic paternalism, saying Socialists are using the issue to distance themselves from the pariah Dominique Strauss-Kahn. DSK, once the Socialist hope for president, is under official investigation in France over complicity in a pimping operation after sex workers were allegedly procured for his orgies. He said he didn't pay and didn't know the women were sex workers. "I challenge you to distinguish a naked prostitute from any other naked woman," his lawyer told the press. The inquiry has been extended to examine alleged group rape over the question of whether one sex worker was forced. Strauss-Kahn denies any violence.

The "white van women" selling sex on Lyon's industrial estate in Gerland embody the French state's difficult attitudes to prostitution. As in the UK, prostitution itself – receiving money for sex, or paying for sex – is not a crime. But activities around it are. Laws prohibit pimping, human trafficking, buying sex from a minor and soliciting sex in public. Brothels were outlawed in 1946.

Lyon, France's third biggest city, which has around 600 street prostitutes, has always been at the heart of sex worker protests. In 1975, more than 100 prostitutes occupied a church in the city complaining about police harassment, sparking similar protests across France until riot police evicted them. Now the Lyon Transit vans are the new frontline. In 2003, Nicolas Sarkozy, then interior minister, introduced a controversial law against soliciting, making it illegal to stand in a public place known for prostitution dressed in revealing clothes. To get round this, women started working in private vans. Selling sex inside a vehicle was not breaking the law. But police are now using any means to crack down on the growing number of sex-work vans, namely parking tickets and tow-trucks. In Lyon, sex workers complain of constant parking fines and being towed to the pound. Some on the industrial estate owe thousands of euros in parking tickets and pound-release fines accrued each month. "You can get two parking tickets in 20 minutes, or be towed away on Tuesday, pay a fine, and be towed again on Thursday," said one. The women stand their ground. One drives 500km from Bordeaux each week, works and sleeps in her van for four days and nights, before going home. Others travel to the area from Burgundy or Paris.

Sex-workers in Lyon protest against the government's plans to penalise their clients. Photograph: Jean-Philippe Ksiazek/AFP/Getty Images

The government is planning a major consultation on the abolition of prostitution. One idea under consideration is to criminalise the client, meaning anyone who buys sex from a sex worker would face prison and a fine. There are only a handful of European countries where clients of sex workers face prison. In 1999, Sweden became the first, followed by Norway and Iceland. But it is far from certain that France will put it on the statute books. The French Socialists would like their abolitionist stance to be mirrored in Europe, namely in the country they see as closest in its attitude to prostitution: the UK. Other neighbours have radically different approaches: in Germany, prostitution is legal and municipally regulated; in Spain, vast borderland brothels in places such as La Jonquera in Catalonia are frequented by French clients.

In a cafe near Place de Clichy, in northern Paris, Elizabeth, 49, and seven Algerian transgender sex workers were having coffee before going to work on the streets in the west of Paris. Elizabeth, originally from Cali in Colombia, had arrived in her blue Citroën people carrier, which with a mattress in the boot doubled as her workspace in Paris's Bois de Boulogne park, where she sells sex from 11am to 6pm each weekday, for ¤40. The Bois de Boulogne, a favourite daytime jogging spot of Sarkozy's, is a centre of the crackdown on prostitutes' vans. Elizabeth has had more than 60 parking tickets this year. "I'm considering a hunger strike against the idea of criminalising clients," she said. "If clients risk prison, sex work will be forced underground and into apartments, pimps will benefit, sex workers' security will be compromised. Already the mere talk of clients being criminalised means there are less customers on the street."

For Elizabeth, transsexual sex work is a reflection of daily discrimination. "As a transsexual, you can't find work, no one will rent you an apartment, it's a difficult existence. Often this seems the only option," she said. Two months ago, Jasmine, 30, started working on a road in the Bois de Boulogne after leaving Algiers. "I can't go back to Algeria because of the way I look. My parents think I'm waiting tables here. I just want a normal life as a transsexual, to run a shop or a hairdressers. But I have to pay ¤40 a night to live in a dire hotel room with no toilet. This is the only way I can get the money. I work a few hours a night, 11pm until 2am. I try to choose men in their 40s, who I think are safe. I'm really scared on the street, but I'm most scared of the police."

The government estimates there are 20,000 prostitutes in France, with between 5,000 and 8,000 in Paris. A parliamentary report last year by a rightwing and a Socialist MP who proposed criminalising clients said 90% of street prostitutes were foreign and 80% of sex workers in France were victims of sex trafficking. Where 20 years ago the majority of street prostitutes were French, most are now foreign and criminal networks are increasing, most recently involving Nigerian women or Romanians trafficking Albanians or Moldovans.

In July, six Romanians appeared in court outside Paris charged with pimping: accused of beating women, confiscating their passports and forcing them to work as prostitutes. Last November a similar Romanian network was dismantled, including minors made to work in the Bois de Boulogne. The paper Le Progrès reported that this summer in Lyon police discovered a Chinese woman in her 30s shut in an apartment she hadn't left for three weeks, forced to sell sex according to a "menu" of services translated into Chinese. Clients had replied to a small ad for "massages". But far from trusting the police to protect sex workers, the atmosphere is one of fear and hostility. Some sex workers complain of being insulted and assaulted: in Colmar in 2010, two police officers and a train-worker for the SNCF national rail were convicted of raping a Romanian sex worker. Other allegations of rape are going through the courts.

Meanwhile the state is under pressure to do more against trafficking and sexual slavery. Rights groups say not enough support and protection has been given to trafficked women who cooperate to denounce their abusers.

"Instead of grandstanding about abolishing all prostitution, why don't they immediately end the prostitution of minors and human trafficking? They've already got all the laws to stop that, yet it still exists," said a male sex worker in his 20s, who works nights in the forest of Fontainebleau outside Paris.

There is fierce debate in France over whether all sex workers should be considered victims, or whether "independents", without pimps and beginning to be unionised, should be viewed as separate. Pro-abolition feminists say the act of paying for sex is always an act of violence, forcing the sex worker to anaesthetise themselves and cut themselves off from their own body to endure it. "Slavery hasn't been eradicated, but it has been abolished. The same choice for prostitution would be an advance for civilisation," said the feminist Sylviane Agacinski. Another high-profile feminist, Elisabeth Badinter, co-wrote a counter-argument saying talk of abolishing prostitution was based on "two debatable assumptions: that charging for sex is an affront to women's dignity and that all prostitutes are victims of their bastard clients". She said a woman selling sex was "not necessarily a victim of male oppression". And not all clients were "horrible predators or sexual obsessives who treat the woman as disposable objects".

Cloé Navarro, 27, spokeswoman for the Strass, the French sex workers' union, studied as a nurse and now sells sex on the street in the west of Paris to pay for her postgraduate studies for work with autistic children. She says she feels safer on the street, working in clients' cars or hotels, rather than on the internet, where she can't see the man before accepting an encounter. "This is not a job everyone can do, but it's a real job. You need a lot of empathy. People come to us with problems. Sometimes I think I've got the word 'nurse' stamped on my forehead," she said. She described clients as "everyone", from 20s to 70s, widowers, men with disabilities, "a high percentage" of new fathers with babies and toddlers. "This government is stigmatising sex workers. I work one street away from a police station. The abolitionist approach would push sex work into a no-man's land where we are more likely be attacked," she said.

The new face of the union is its leader, Morgane Merteuil, 25, a postgraduate literature student. She started sex work as a student in a hostess bar in Grenoble, but now works exclusively on the internet as a self-employed escort. A one-time anarchist activist and rebel from a conservative provincial family, she has just published what she calls a feminist sex workers' manifesto. She balks at "media cliches" that sex work divides between low-class work on the street or high-class five-star luxury: "I don't think I've ever met a client in anything more than a cheap hotel costing ¤60 a night," she said. She rails at the new leftwing government for "morality politics" and "paternalism", describes sex-work as a job – "a necessity, like any other job" and demands the immediate scrapping of the law against soliciting.

In Lyon, Karen was preparing to lock up her van and go home to her boyfriend. "It's not possible to abolish prostitution," she said. "Look at the death penalty, did that stop murder?"