X11 forwarding: Unable to init server: Could not connect: Connection refused. What is needed for an X11 connection?
Answer:
Install xauth on both sides: sudo apt-get install xauth.
To find what is wrong turn on debugging with ssh it is done by:
using switches -v, -vv and -vvv where the last gives the most in-depth info.
By using the first switch at the end of debug messages I found:debug1: Remote: No xauth program; cannot forward X11. Which was the answer.