Time machine doesn't work because reads the wrong disk size

Time machine started insisting I had not enough space on the disk. Normally it would delete old backups and get on to it. But this time I kept getting the "disk full"or  "not enough space message" (do not remember witch one). So I formatted the disk, many times. The message stuck.
No I checked what Time Machine itself was seeing, and it is pretty weird. Time Machine thinks it is a 700mb disk, while it is a 1Tb one as you can see below.
It was working well enough, thank that started.
Any thoughts?
Thanks.
PS: I use Yosemite 10.10.1, Imac 20, mid 2011

The first screenshot shows the amount of data on the volume, not its capacity. Apparently it's not large enough to hold all the data you're trying to back up, including about 20% of padding that Time Machine requires.

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