Justification for Catholics and Protestants

Though the issue at the root of the Reformation was the ultimate authority in the Christian Church, whether scripture or the office of the pope as the locus of tradition, which is the content of belief in God and His church, the heart of the theological conflict was justification. The Protestants denied the value of good works in the matter of salvation, linking eternity with God after death solely to the will of God, or predestination. The Catholic response at the Council of Trent (1545-1563) was like this, as one historian describes it:

[All people] … stood condemned because of Original Sin and were saved only by the sacrifice of Christ. They had to respond freely to the offer of salvation, but the response was made possible only by “predisposing grace” that was offered to all, without any merit on their part, since God desired that all should be saved. Once accepted, such grace rendered human works meritorious in God’s sight, so that, contrary to the Lutherans, justification was not merely “imputed” to [the individual] by a merciful God, but [all people] were actually made righteous by Christ’s sacrifice.
[Everyone] could overcome sin, because concupiscence, though an ineradicable part of human nature, was merely a disposition to sin, not sin itself. As often as [people] fell, they could be raised up again, especially through the sacrament of penance, because even mortal sin caused the loss only of grace, not of faith.
Although faith was received as a gift, by cooperating with grace and performing good works, believers could grow in hope and charity and be made capable of obeying the Law. But they should also not have ‘vain confidence” that they would never lose the gift of salvation, as the Protestant doctrine of predestination implied, since, because of their free will, [all people] could either grow in righteousness or lose grace through their own fault.

James Hitchcock, 2012, History of the Catholic Church, Ignatius Press, San Francisco

Lutheran Bishop Christian Krause and Cardinal Edward Cassidy sign The Joint Declaration on the Doctrine of Justification on October 31, 1999, in Augsburg, Germany

After a long period of study and dialogue, the Lutheran World Federation and a pontifical body of the Catholic Church in 1999 presented The Joint Declaration on the Doctrine of Justification, which carried these statements: 

40.The understanding of the doctrine of justification set forth in this Declaration shows that a consensus in basic truths of the doctrine of justification exists between Lutherans and Catholics. In light of this consensus the remaining differences of language, theological elaboration, and emphasis in the understanding of justification described in paras. 18 to 39 are acceptable. Therefore the Lutheran and the Catholic explications of justification are in their difference open to one another and do not destroy the consensus regarding the basic truths.
41.Thus the doctrinal condemnations of the 16th century, in so far as they relate to the doctrine of justification, appear in a new light: The teaching of the Lutheran churches presented in this Declaration does not fall under the condemnations from the Council of Trent. The condemnations in the Lutheran Confessions do not apply to the teaching of the Roman Catholic Church presented in this Declaration.

Though the Lutheran World Federation did not accept the declaration without some adverse votes, the World Methodist Council unanimously adopted the document in 2006. On the Catholic side, the response had a wary tone. As the Catholic negotiating party, the Pontifical Council for Promoting Christian Unity had accepted the value of the consensus achieved, but the official Catholic position was that the areas of agreement were not "such as would eliminate every difference between Catholics and Lutherans in the understanding of justification". The Catholic response expressed the hope that dialogue would continue.