Comment 3 for bug 304263

The issue was indeed that I did not have readline installed properly.

As a side note, if your setuptools install is not up to date your readline install will fail with the following message:

Searching for readline
Reading http://pypi.python.org/simple/readline/
Reading http://www.python.org/
Best match: readline 2.5.1
Downloading http://pypi.python.org/packages/source/r/readline/readline-2.5.1.tar.gz#md5=1bc37e7c184bee00c2c2230630fae1d2
Processing readline-2.5.1.tar.gz
Running readline-2.5.1/setup.py -q bdist_egg --dist-dir /tmp/easy_install-pHXIGx/readline-2.5.1/egg-dist-tmp-XvdCMV
No eggs found in /tmp/easy_install-pHXIGx/readline-2.5.1/egg-dist-tmp-XvdCMV (setup script problem?)

As discussed in this thread http://bugs.python.org/setuptools/issue4

I wonder if this should be mentioned somewhere in the documentation.