Connection failed to open the DB connection: SQLSTATE[HY000] [2054]

I can't connect to remote MySQL database.
This is what I am getting in logs:

[2015-12-07 11:12:32] local.ERROR: * System error building event map for service 'mydatabase'.
Failed to connect to database.
Connection failed to open the DB connection: SQLSTATE[HY000] [2054] The server requested authentication method unknown to the client

I have checked config from Navicat and works fine. Remote access is open. My hosting company changed user to use old password authentication with 16 byte password hashes, which they thought might help. Still same problem.