Found the reason myself:

---
>> - hosts: "{{ host | default(localhost) }}"
>>
>
This should be:

--- 

- hosts: "{{ host | default('localhost') }}"


Still would be nice to get more valuable error message. I guess Jinja2 
translates bare localhost to variable name, which in turn is translated to 
empty string, but why the Ansible shows PLAY [{{host | 
default(localhost)}}] **** and not PLAY [] **** or PLAY [#ERROR] **** ?

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