It's common for Protestants to claim that justification by faith is the single major issue separating Protestants from Catholics. Coming from a Wesleyan background, this has never loomed as large for me. Sure, I was taught that Catholics thought they were "saved by works," but when I came to understand what the Catholic Church actually taught (as opposed to what many Catholics may believe or have believed), I couldn't see that it was such a big deal. I had always been taught that justification involved actually being changed and not simply imputation (my tradition used "justification" pretty much synonymously with "regeneration"--at least that's the impression I got growing up). I was dubious about the whole notion of imputation, and even if it was true I couldn't see how something that abstruse could be the point on which the Church stood or fell. The living presence of the Holy Spirit in the heart--that was what I had always been taught was the main thing, and nothing I have learned in adulthood has persuaded me differently.
However, as I've been involved (on both sides!) in Protestant-Catholic discussions over the years, it's become clear to me that there is some significant difference regarding justification, not only between Lutherans or Calvinists and Baptists and Catholics, but between _all_ evangelically minded Protestants and Catholics. Unquestionably Protestants and Catholics alike experience God's grace. But evangelical Protestants have a particular way of speaking about grace that enables them to testify to it in a way rare among Catholics. And for all the faults of evangelicalism, this way of speaking about grace and salvation clearly speaks to many ordinary people in a way that Catholicism doesn't. Whatever explanations and excuses and qualifications we may make, the fact remains that thousands, maybe millions of people have failed to hear the message of grace in Catholicism and have heard it in evangelicalism. Believing as I do that to break communion with Rome is always tragic (whether or not it can be justified), I think it's important to understand why this happens rather than explaining it away. Poor catechesis may explain a lot. But then one has to ask why Catholicism so routinely fails in this particular department? The people who don't seem to have understood free grace are far more numerous than the people who didn't understand transubstantiation or the Church's moral teachings (numerous as those are these days).
For a while now I've been mulling on a possible answer. It isn't something that I hear stressed a lot in discussions of justification, at least not in quite these terms. I think the key difference between all evangelical Protestant theologies (I'm using "evangelical Protestant" with deliberate looseness--feel free to pin me down!) and Catholicism is the Catholic belief in sola fide. Not, of course, that faith can save on its own, but that it can exist on its own. Protestants generally deny this. At least, orthodox Protestants (another loose term) deny that the "faith" that can exist without charity is the same thing as the faith that saves. We furthermore deny that this loveless faith, this faith of demons, is a supernatural gift. Rather, we see it as just another opinion about religious matters, no more a gift of God than any true opinion is. A true opinion about God has more importance and dignity than a true opinion about onion soup, but they are both human opinions. The faith that God gives, the faith that is supernatural, is faith that transforms the soul and causes us to bring forth good works through love.
It is, of course, common to say that Catholics and Protestants define faith differently, and that this leads to a lot of misunderstanding. Or more polemical Protestants may say that "Rome" has no conception of what faith really is, and this is the root of its horrible errors (this is basically what Luther himself said). I'm saying more than the first statement and less than the second. Certainly this disagreement is a matter of definitions. Christians experience the grace of God no matter how they define it, and a matter on which so many wise and holy people are found on both sides cannot be one of the essentials of the Faith. And yet it may be important.
Catholics, it seems to me, think of saving faith as a composite act: first you believe (which is a gift of God) that God is God and that the things proposed by the Church for belief are true. But this faith remains dead unless it has added to it (which again is only possible by God's gracious gift) the infused habitus of charity, which lives only as long as you persevere in cooperating with the grace of God working in you. Thus, when Catholics are exhorted to believe, they are exhorted to accept truths intellectually (though, as St. Thomas said, this requires an act of the will which gives the certainty of knowledge propositions that on a natural level have only the nature of opinions). They are then exhorted to do certain things in order to make and keep that faith "living."
This division is one of the things to which Luther objected most profoundly. And I think he was right (though not in the vitriol with which he condemned the Catholic position). The real issue is not so much imputation vs. infusion, or exactly in what sense human beings can be considered to cooperate with God's grace (on both of which points I am in more sympathy with the Catholic view than with Luther). To me, the profound insight of the Reformation (with regard to soteriology) was that living faith is a single and simple act. (Simple in the technical philosophical sense: uncompounded, non-composite, irreducible.) It is not "belief in everything God has revealed" plus charity. Or more precisely, this way of defining it may be correct in a sense, but it is pastorally and psychologically false, because it divides what must (in our experience if not in our theology) remain utterly indivisible.
I don't buy the idea (even though Aquinas taught it) that there are certain doctrines you can only believe by a special gift of God. Human beings can believe just about any theoretical proposition, if circumstances favor credulity. But to place one's whole trust in Christ's grace and love (to quote the 1979 Episcopalian baptismal liturgy); to accept the searing, transforming, renewing power of grace; to throw oneself on God's mercy as a forgiven sinner and at the same time rejoice in the dignity of being a son or daughter of the King of Heaven; this is only possible by a grace that perfects our nature.
That means that evangelicals can proclaim the grace of God with a clarity and simplicity that traditional Catholic doctrine makes impossible. (Or at least normally so: I take Pontificator's point that many Catholic saints, such as St. Therese of Lisieux, have expressed this simplicity of faith. But post-Tridentine doctrine does not make this easy.) It isn't that Catholics don't experience the same thing Protestants do. Indeed, Catholics have spiritual resources at their disposal of a richness and depth that far surpass those normally available to Protestants. But these resources are of use only if you have gotten the basic message. And the indisputable fact is that very many Catholics simply don't. The simplest and most reasonable explanation is that something in Catholic doctrine obscures the message of grace. It doesn't deny it, but it makes it harder for many Catholics to grasp. When faith and charity are separated out and you are told that faith can exist without charity, but charity must be added to faith, it is harder to experience just what the phrase "believe on Jesus Christ and you will be saved" means. Furthermore, it is easier to be at least somewhat complacent about a faith that does _not_ work by charity. After all, you have _part_ of the formula. You just need to work on the charity part--and that is only a good confession away. Hence the indisputable reality of widespread antinomianism among Catholics, which goes straight against the stereotype of anxious Catholics trying to work out their own salvation. Perhaps antinominanism is too strong. I don't mean that Catholics think (as the more heretical Baptists do think) that you can be saved while clinging wilfully to serious sin. But it seems hard to question the fact that traditional Catholic societies contain large numbers of people who see themselves as devout Catholics while also admitting that they are probably not in a state of grace much of the time. On a cultural level there are certain advantages to this (it allows for a heavy permeation of the culture with Christianity even if most people are not willing to try seriously to live a holy life). And it's certainly better than a genuine antinomianism that doesn't recognize the seriousness of sin. But it's hardly surprising that to people used to that kind of culture, the message of evangelical Protestantism often seems like a light in the darkness, because (if it is not the genuinely heretical version taught by some Baptists and quasi-Baptists) it teaches the necessity of a habitually holy life. By denying any spiritual value to faith that does not work by love, it forces people to make a stark choice: either they are not really Christians at all, or their lives must habitually show the fruit of living faith. (This should, of course, be a matter for self-examination, and even then one should be reticent to make final judgments. Catholicism is absolutely right that we have no business trying to figure out someone else's state of soul, and some forms of evangelicalism have gone horribly wrong here.)
This, I think, is at the core of all the fights over justification. Is faith essentially assent to what God has revealed, to which charity must be added? Or is it a single, living, simple act, consisting of a total reliance on the grace and love of God in Christ, overflowing into the love of God and neighbor? I believe that Scripture, as a whole, teaches the latter, and that the recovery of this understanding was one of the few genuinely positive aspects of the Reformation.