This question was answered by @SphericalCow:

according to this forum thread, you may have installed an incompatible epel repository.

(from the above forum post)

Checked again and the problem occurs if you install the BETA EPEL 7 package. Even if you remove it and install the correct epel-release-6-8.noarch.rpm package, it leaves /var/cache/yum/$arch/6/epel there with an xz file cached there and then yum cannot read it. You need to first, yum remove epel-release then rm -rf /var/cache/yum/x86_64/6/epel (or the 32 bit version if your system is not 64 bit) then install the correct epel-release package.

The epel-release-7 package is for the, as yet, unreleased RHEL7/CentOS 7. If you install it on your el5 or el6 system then it will break yum.

I usually like to follow the instructions here to install the Epel repo.

View the original comment