From the Astronautix site
In 1994 it was concluded that development would have been very costly, while the design would reduce costs only 10 to 30% below that of the Ariane 5 expendable vehicle. Accordingly the project was cancelled.
Has anyone seen what the report said about why the proposal would produce such little saving over an expendable launcher?
Sänger II "died" official in 1995, it was series of interacting reason what let to cancelation.
the first: MBB in 1980 start Sänger II as technology study and NOT as a official program !
1989 MBB became part of DASA (Deutsche Aerospace Aktiengesellschaft later Daimler Benz Aerospace Aktiengesellschaft. today EADS
Second: the Sänger II concept had unusual success in Aerospace industry, media and german politic scene
because the option: Manned, unmanned space flight and a Mach 7 airliner
what let DASA to declare Sänger II to there "official" program, much to anger of France who work on Hermes space shuttle.
Third: This let to some German French dispute about ESA limited budget use on Hermes or Sänger II
Also let to a strange situation, that French also start study Sänger II like concept by CNES and Dassault!
in Germany Sänger II is study by Universities like RWTH Aachen, who made a feasibility study on order by DFG (Deutsche Forschungsgemeinschaft)
more here http://www.secretprojects.co.uk/forum/index.php/topic,4564.0.html
Forth: Sänger II needed technology, what far far away from German level on hypersonic aerospace research.
it's major problem was the Mach 7 engine on first stage.
Fifth: In 1989 to 1991 Germany change completely, with collapse of East Germany and Unification of the two germanys.
Money was needed for Unification process, So Sänger II project came under the budget axe.
in 1995 Sänger II had not enough budget for Engine test or build a Mach 7 demonstrator aircraft. also study from german Universities show that Sänger II is not cheaper as Ariane 5 launch vehicle, so the Project was terminated.