$SU(N)$ is the group of special unitary matrices of dimension $N$, i.e., the set of all unitary ($U^{\dagger}U=I$) $N\times N$ matrices with $\det(U)=1$.
For $N=2$, these matrices are spanned by the identity and the Pauli matrices, i.e. we can write
$$U_{2\times 2} = a_0 I_2+\vec{a}\cdot\vec{\sigma}$$
so I would say that the basis for $SU(2)$ is $\{I_2,\sigma_1,\sigma_2,\sigma_3\}$.
However, I've read in several lecture notes (and wikipedia seems to agree) that "$SU(N)$ is generated by traceless Hermitian matrices and so has (real) dimension $N^2-1$." Can someone explain this?
Why traceless? This would immediately rule out the identity which, in my view, is needed for $SU(2)$.
How is it $N^2-1$ and not $N^2-2$, as we have 2 conditions (traceless and hermitian) on the basis elements?